Friday, January 13, 2006

VW's demands wreck deal with Proton

By Yong Soo Heong

(Bernama) -- Volkswagen AG's plans to relegate Proton Holdings Bhd into a mass assembler of complete knocked-down (CKD) VW cars and its insistence on taking a controlling stake in the Malaysian national carmaker have wrecked plans for the two automakers to strike a strategic tie up, say people familiar with the negotiations.

"It was simply not acceptable to Proton to be downgraded from being a full-fledged auto manufacturer to a mere assembler of VW cars. This would have meant the end of Malaysia's ability to develop and manufacture cars," said an investment banker.

His comments came in the wake of VW's announcement yesterday that it would not go ahead in forging a strategic alliance with Proton.

The VW announcement took many by surprise after it was reported that it had dropped its insistence on having a majority stake following talks between the two parties in Bangkok recently.

The German carmaker said it "had a very specific idea how we wanted to proceed (but) unfortunately the Malaysian government, Khazanah Malaysia and Proton had different ideas."

The investment banker said when Proton explored a potential joint venture with VW, it was with the intent of establishing a closer collaboration between two equal partners.

It was essential that as a national project Proton maintained its independence, he said.

"Over time, it became apparent that VW wanted to exercise control over Proton, including the running of its finance, management, product development and manufacturing operations.

"This would have effectively turned Proton into a subsidiary of VW and it was obvious that the Malaysian government would not concede to these demands," said another source.

He said VW, by using Proton to break into South East Asian markets with CKD operations and car sales, was only ready to collaborate on the sale of the old VW Passat model in Malaysia, with VW retaining rights of sales.

The cessation of negotiations, he said, was of no surprise as the "terms are unpalatable to Proton."

Meanwhile, Proton is reported to be exploring other partnership and project-based options by pursuing a multi-party strategy with several global car manufacturers. These include forging specific partnerships with a US car manufacturer and one from Japan.

As a part of its long-term export push, Proton has also earmarked China as a key long term market to develop. The national car company is reportedly negotiating with several China-based carmakers for partnerships specific to the Chinese market.

14 Comments:

Richard Teo said...

Proton's management must be joking. Who would want to put control in the hands of Proton when they they have very little technological know how.Furthermore to put financial management in the hands of proton would be suicidal and any sane investors would not be so stupid to do just that.Japan's mitsubishi smell a rat and was quick enough to dump proton equity.Who would want to put in good money and let proton bumiputra's management ruin the whole company by employing half baked malay engineers who are poorly qualified.Come on Proton, you can force local non-bumis to accept your terms but not likely you can force that on Multi national companies to accept your ridiculous terms.In fact they are quite generous enough to let proton be an assembler of their VW cars.

Saturday, January 14, 2006 12:24:51 AM  
AikTuak said...

richard teo,

Let me correct you, this is a pure Malay's management and it has nothing to do with bumiputra. This is what we called "Ketuanan Melayu"! Let VW teaches Proton, who is the real boss here. Their stupidity is finally paid off.

Saturday, January 14, 2006 12:48:40 AM  
ProArte said...

Typical of the 'hak istimewa' mindset which creates a 'free ride' attitude towards life. This simply is not sustainable and will unravel.

Malays must quickly realise that the NEP, with its divisive and conterproductive policies was really to enrich the UMNOputras beyond their wildest imagination. The relative backwardness of the Malays was used as justification for the unjust privileges and largesse which the UMNOputras siphoned off. It is in UMNO's interest to keep the Malays backward, poor and insecure. The Malays actually now believe that without the tongkat they will perish. Malays must realise they are just pawns in UMNO's policy of plunder.

Saturday, January 14, 2006 2:25:03 AM  
cognisant said...

Whilst we are fighting over who is to control Proton, we are forgetting that the anticipated higher oil prices are going to radically change the challenges of the motor industry. Do we have the ability to face these challenges since we cannot even solve the problem with Proton doors? Hybrid cars, etc?

Saturday, January 14, 2006 6:30:35 AM  
bumi-non-malay said...

their next FAKE Bumi Proton Hybrid project is to make manual windows work ... So watch their share price Rally on this world first break thru!

Proton Next world first Hybrid Car will be called BICYCLE!!

Next Boycott is all those NEW Cars...make those UMNO racist terrorist AP cronies PAY!!!

Saturday, January 14, 2006 6:43:13 AM  
Bigjoe99 said...

Don't believe everything you read in the papers. This sounds more like blame the other guy piece and the true picture for the breakdown may not come out at all at least for a while.

I have worked with Volkswagen in other countries and the picture painted here is uncharacteristic. My own guess is that Volkswagen tried to design a plan that had a reasonable chance of success but that Proton and Khazanah unrealistic conditions made it either too difficult or not enough benefit to justify it.

This is a tough business. Any plan with Proton involved pain to quite a few people one or/and two areas in management, financial and suppliers. Its given. In the end, I think there is not enough will to take the pain.

Saturday, January 14, 2006 8:53:42 AM  
justchamp said...

Looks like the Government still would like to keep Proton as it is now. Still got a lot of political obligations to meet up could be the main reason for not letting Proton out of its grip. Putting China into the picture is just to project a bright future. The reality is Proton will continue to used up a lot of the public money just to be in operation. The billion dollar question is how long we are going to keep up with this extravagant national project?

Saturday, January 14, 2006 9:53:50 AM  
Plain Truth said...

Proton only made money when it was protected by anti-competitive Govt. policies which have now to be disbanded. Wake up,Proton to the real world!

At least, becoming an assembler for other (successful global car) manufacturers, like VW, proton can redeploy its manufacturing assets profitably.

If not, there has to be a drastic write-down of its plant & machinery...(number crunchers call this 'impairment of assets') as further wealth destruction of taxpayers' (i.e. Khazanah)investments.

It's time that management of national assets be more accountable for public listed companies they run, OR are they just rent-seeking the national assets via big fat salaries.

Saturday, January 14, 2006 10:21:20 AM  
harimau said...

'Come on Proton, you can force local non-bumis to accept your terms but not likely you can force that on Multi national companies to accept your ridiculous terms.In fact they are quite generous enough to let proton be an assembler of their VW cars'.
said richard teo.

Well said!!! This has been the mentality moulded into them all these years. Trying to teach others how to do things when they are not expert. With globalisation, this attitude no longer holds. Only the best will do. Even powerful economy like Japan has to bow to the west in areas where they are still weak in. If we were to still stick to the 'Ketuanan Melayu' agenda, we will not be getting anywhere. the world does not recognise this!!!
Good example is VW! The logical thing to do is to let VW manage the company and we learn from them. Not the other way round which is like teaching your grandfather to suck eggs!!!
I believe no sensible car manufacturers will submit to Proton terms if it still harbor such attitude.

Saturday, January 14, 2006 12:41:18 PM  
Richard Teo said...

Proton management wants to retain control so that it can continue to employ UMNO cronies, hangar ons,and unemployed graduates. VW when they take over will clean out the rubbish and engage only qualified people. Proton's management are fully aware that when they lose control of the company all their jobs are threatened.That explains why they would rather not go into J.V with VW knowing fully well they would lose their cushy job at the expense of the taxpayers money.

Saturday, January 14, 2006 5:06:45 PM  
MrSpicy said...

Richard teo,
I totally agree with you. "Retaining control" means "retaining the absolute power to employ cronies and their unqualified relatives". Like what I mentioned a few weeks ago,when Chrysler was bought by Daimler, the Germans took a drastic move by throwing and substituting almost all Chrysler top managers with German. I am sure our proton managers are afraid to get the same destiny.
It is only a cover up statement to get rakyat blind support by saying things like "national project proton should maintain its independence" or "Proton is malaysian pride" and etc. The truth, Proton is a Taxpayer Sucking Machine. If there is not enough money, then just inject from Petronas. Btw, we have tons of oils for sale. Besides, 60++ dollar per barrel is not bad at all to generate billions every year. Only the cronies know the real amount.

Saturday, January 14, 2006 7:24:42 PM  
devious17 said...

VW is only calling a spade as it is , a spade. Chinese calls a bowl as it should be,a bowl.

VW sees proton as fit to be an auto assembler and not more than that.

proton, if you cannot make it just admit you fellas cant laa and save us the taxpayers some ringgit laaa instead of putting up a front like an arogant bully that has been defeated by the class bookworm.

Shame. When you had it going for you ,you took us for granted,now taste the repercussion to your stupidity and action.

Sunday, January 15, 2006 2:14:02 PM  
People-In-The-Closet said...

This post has been removed by the author.

Wednesday, January 18, 2006 12:13:05 AM  
People-In-The-Closet said...

To all people above who stand against proton, I think that you guys are not even have a sense of patriotism. Please find and read the history of korean and japanese automotive history. What they have done previously was really worst than proton.
Come on man, be realistic.... What I can say, most of the people just know how to critisize, but actually they know nothing about what the hell they are talking about, e.g. richard teo - if you dont like Malaysia, please move to china or singapore ASAP. Then you'll know what the hell is going on.

Wednesday, January 18, 2006 12:19:41 AM  

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