Chinese automaker buys stake in Malaysia's Proton

Chinese automaker buys stake in Malaysia's Proton

Chinese automaker buys stake in Malaysia's Proton

"The key is to make Proton and Lotus sustainable brands moving forward, if both DRB-HICOM and Geely can capture the window of opportunities presented, and we believe, it will translate to economic benefits in the future".

Li Shufu, chairman of Zhejiang Geely Holding Company, said: "As an iconic national brand, Proton epitomises the spirit of Malaysia".

Under the deal, Geely will give Proton a cash injection of $40 million and supply it with the manufacturing platform for one of its best-selling cars, Boyue SUV, an undertaking worth $68 million.

Moving Lotus production to China, where manufacturing costs are much lower than the United Kingdom, would be a simple way for Geely to boost the automaker's profits. Proton will rebadge, manufacture, sell, market and distribute Geely models in Malaysia and Southeast Asia.

Proton was formed in 1983 as part of an ambitious national industrialisation plan, but has suffered from a reputation for unimaginative models. Proton was privatized in 2012 but its new owner, conglomerate DRB-HICOM Berhad, was unable to revive the carmaker.

Prime Minister Datuk Seri Najib Tun Razak, who witnessed the signing, said the agreement cements a strategic partnership between the two companies. But he warned their revival will be hard in a highly competitive market.

He also pointed out that, following the signing of the agreement, Proton will settle its RM533mil syndicated loan from a number of Malaysian banks.

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But purchasing a controlling stake in British sports-car maker Lotus may be the biggest coup for Geely, which is known mainly for producing low-end cars in its home country.

"Geely has owned Volvo since 2010, a takeover that raised some eyebrows at the time".

The Chinese automaker said earlier the Proton deal would strengthen its global footprint and develop a beachhead in Southeast Asia.

DRB-Hicom Bhd and Zhejiang Geely Holdings Group have inked a definitive agreement under which the latter will acquire a 49.9% stake in the national auto manufacturer for RM460.3mil.

In expressing his confidence, Najib said, Proton would have the ability and resources to turn itself around and become an example of Malaysian success, without needing handouts from the government.

Among them were that Proton would be given the exclusive rights of Geely's products and latest technology to the region, and access market beyond the SEA and China, he said. "He would still prefer Proton to be 100 per cent Malaysian-owned and lose hundreds of millions of ringgit a year", Datuk Seri Najib said, without explicitly naming anyone.

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