Explain Agusta sale, Proton
January 4, 2006
The Star

AS the people who were responsible for the purchase of Meccanica Verghera Agusta (M.V. Agusta) motorcycle manufacturer of Italy, we, Tun Dr Mahathir bin Mohamad and Tengku Tan Sri Mahaleel Tengku Ariff, believe Proton owes an explanation to Proton shareholders and to the public the reason a company that was bought for 70 million euro (RM315mil) was sold for one euro (RM4.50). 

This sale must cause Proton to lose RM315mil less RM4.50. Assuming that this relieves Proton from paying the loss incurred by M.V. Agusta over the 15 months at 26.87 million euro (or RM131 mil), it would still lose the purchase price of 70 million euro by selling off at one euro.  

There is now no possibility for Proton to turn around the company and regain its purchase price, if not make a profit. Of course, Proton will now not get access to M.V. Agusta engineering technology. 

Proton bought M.V. Agusta knowing full well that it has a debt of 232 million euro, which it does not have to pay for three years. M.V. Agusta has assets in the form of two plants (in Cassinetta and Morazzone) and stocks of motorcycles. 

In addition, M.V. Agusta owns three brands – M.V. Agusta, Cagiva and Husqvarna. The M.V. Agusta F4 1000 Tamburini is recognised as the best sports motorcycle in the world. All these brands have high value. 

M.V. Agusta’s technology in motorcycle and small engines is acknowledged by the industry as second to none. 

Losing automotive companies like Rolls Royce, Bentley, Skoda, Lamborghini, Aston Martin and many others have been bought by stronger companies and have been turned around. But the prices reflect the assets and the brand. As far as we know, they were not sold for one euro. 

The question is, can Proton turn around M.V. Agusta? Until lately, Proton has been profitable. It built its facilities in Tanjung Malim for RM1.8bil with its own money – no borrowings and no injection of capital from the Government.  

After building this facility, Proton still has more than RM2bil in cash. Proton was a profitable company and must know something about management to make profits. 

The recent loss by Proton is said to be due to provisions made for M.V. Agusta loans. But in answer to questions by the press, a Proton manager (Datuk Maruan Mohd Said, Proton Edar CEO admitted that the discounts given by Proton have affected the profits of Proton. Unfortunately, no figures are given.  

But apparently, a total of 54,000 cars were sold in three months with rebates and large discounts which include free registration, free insurance, free first instalment payment for three months and free service. Roughly, the discount per car would be around RM2,000 or more. At RM2,000 on 54,000 cars, Proton would forego RM108mil. The increase in the number sold cannot make up for the amount foregone. 

These figures which reflect a failed strategy have not been given. Instead, the loss is attributed to provision for debts of M.V. Agusta. When provisions are made for bad debts, it does not necessarily mean that the debts cannot be recovered. Besides, how is the quantum determined? The debts of M.V. Agusta are frozen in any case and it need not be paid immediately. Has the amount provided been paid so as to reduce M.V. Agusta’s debts or is it still with Proton when M.V. Agusta was sold at one euro? 

There are in fact many questions which have to be answered regarding the sale at one euro of an entity that was bought at 70 million euros.  

# Who offered to sell or who offered to buy at one euro?  

# Were there other bidders?  

# Was there an attempt to get the buyer to pay a higher price?  

# Was there an announcement that M.V. Agusta was up for sale? 

# If not, did Proton approach only one bidder? 

# If other bidders were offered, did they reject? 

# Who in fact made the decision to sell? 

# Can Proton explain how selling an entity bought at 70 million euros for one euro would not cause Proton to lose money as is claimed? 

Gevi S.p.A. is not a household name in the automotive industry. Is it a motorcycle company, confident that it can turn around M.V. Agusta, something that the sale by Proton implies that Proton has no capacity or ability to turn it around? Not having to pay 70 million euros will be an advantage for Gevi. 

These are questions that need answering. As the two people most involved in the purchase of M.V. Agusta, our credibility and honesty is at stake. We want to know the correct answers. The public too may want to know as Proton is a national project. 

Source: http://thestar.com.my/news/story.asp?file=/2006/1/4/focus/13016648&sec=focus