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Saturday January 20, 2007

A plan for Proton


IT was not too long ago that Tan Sri SM Nasimuddin SM Amin found himself up against tycoon Tan Sri Syed Mokhtar Albukhary in a protracted battle for the coveted stake in DRB-HICOM Bhd. 

The two are once again vying for the same prize, but this time it involves a stake in national carmaker Proton Holdings Bhd. However, unlike the situation the founder of the Naza group found himself in a couple of years ago, Syed Mokhtar is probably the least of Nasimuddin's worries now.  

The fact is that several foreign auto stalwarts like Volkswagen AG, PSA Peugeot-Citroen and General Motors Corp have also expressed their interest in Proton.  

The other local players that are reportedly keen to take over the reins at the national car company are Sime Darby Bhd and the Mofaz group. 

Nasimuddin: We are willing to pay close to Proton’s net tangible asset per share for the stake
But Nasimuddin appears unfazed that he is up against several global players in this particular bid. His contention is that Proton should remain in the hands of a local entity if there is a company with the expertise and network to drive the business.  

“I believe the Naza group will be able to take Proton to the next level within the next three years. We have proposed to the Government some of the immediate steps we can take if we get the stake. 

“For instance, for the Perdana and Waja models, we can use the existing platforms to spin off two new models. It will involve a total body change but the platform is already there, so it's not that difficult a task,” he tells BizWeek

The general perception is that Nasimuddin's Naza group is the dark horse in the competition to bag Khazanah Nasional Bhd's equity in Proton.  

Nasimuddin, however, is not rattled by the perception. “If it doesn't work out, it doesn't. I will still be focused on Naza and its future direction, but we see what can be done for Proton. If I don't think it could be done, I wouldn't be willing to put my own money behind it,” he tells BizWeek

Indeed, some industry observers have voiced their scepticism about the Naza group's ability to fund the acquisition given that it is a privately held entity.  

Nasimuddin, however, says the purchase of the stake would be funded using internally generated funds. “We are willing to pay close to Proton's net tangible asset (NTA) per share for the stake,” he says.  

As at end September 2006, Proton's NTA per share stood at about RM10, which means he would have to fork out about RM2.1bil for Khazanah's 38.3% stake in the national carmaker. 


Naza's game plan 


Nasimuddin is quite reluctant to disclose his actual game plan for Proton although he states that ramping up Proton's exports is key to the car company's survival. 

“Malaysia has a population of about 25 million people so it is obvious that the only way for Proton to generate enough business to ensure its survival is to focus on exports.  

“A lot of the bigger players have already started looking for bigger markets like India and Indonesia. It is time for us to do the same especially now that competition in the domestic market is so stiff. For example, Proton is now selling 20,000 to 40,000 units of its end-of-life models like the Wira and Iswara in Malaysia. If we were to push these to India, we can have a volume of about 80,000-100,000 units,” he comments. 

In fact, a similar strategy is underway for the Naza group, with his team laying down the groundwork for the Naza group's overseas exploits. 

Later this month, the motor group will ship off its first batch of Naza Sutera cars to Bangladesh. Plans are also underway for the group to make inroads into India and Pakistan. But by Nasimuddin's admission, production capacity is one of the constraints the group is currently facing. This makes it obvious why a stake in Proton would be beneficial to the Naza group.  

“Because of our plant capacity, we can only go to small countries like Bangladesh and Sri Lanka where the volume is small. At the moment, we are leasing some capacity at the Pekan plant from DRB-HICOM. In terms of models, we have a few of our own now, but if we were to add Proton's models to our range then we will be able to cover the whole spectrum. 

“As you can see, Naza and Proton are headed in the same direction, so it makes sense for us to combine and do it together,” Nasimuddin says.  

The Naza group, in its presentation to the Cabinet Committee on Transportation on Jan 4 this year, highlighted eight key initiatives to add value to Proton. 

Apart from ramping up Proton's exports, its proposal includes rationalising Proton's model line-up and introducing new models, improving quality, improving OEM-vendor performance, creating economies of scale in collaboration with the Naza group, reviving Proton's sales and marketing arm, improving after-sales service and securing long term commitment of foreign technical partners.  


Last piece of the jigsaw 


However, he does not discount the fact that tying up with a foreign technical partner would still be crucial to Proton's longer-term prospects under the Naza group. 

Nasimuddin says several large international auto players have expressed interests in working with him to revive Proton.  

“Some of the initiatives we can do without bringing in a foreign partner because we have the capability and research and development facilities even. But eventually we will need a foreign technical partner for the Naza-Proton alliance,” he says. 

If and when that time comes, the chief of the motor group says there are a host of possibilities that could add value to the Naza-Proton tie-up.  

Says Nasimuddin, “We are already working with Peugeot, we have Kia and we even have a good rapport with Ferrari, so there is no shortage of partners. For the design aspect, we can even bring in companies like Pinin Farina.  

“We are open to working with anyone, but it should be up to us to choose whom we would like to work with and see in which segments we would need to rope in a foreign technical partner.” 


A long shot?  

At the outset, one will not be faulted for assuming that Nasimuddin's Naza Group is out of its league, battling against the likes of General Motors and Volkswagen or even local conglomerate DRB-HICOM, which is synonymous with the early developments of the automotive industry in Malaysia. 

Most analysts too say that they would not put their money behind Nasimuddin bagging Proton. 

Nasimuddin, however, thinks otherwise as he believes that he has what it takes to turn things around and stem the bleeding at the national automaker.  

“Running an auto company is largely about having a vision and the drive. It is about making split-second decisions and standing by it. 

This comes with experience. We have been in this line for more than 30 years now; it's not something new to us. 

“When we first came up with the plan to introduce Kia to Malaysia, there were many who doubted our ability. Last year we sold more than 50,000 cars, from a mere 500 units when we first brought Kia into the country,” he says. 

It is clear that Nasimuddin is used to calling the shots and having things done his way. 

For a man looking to take over the country's ailing car company, Nasimuddin is surprisingly calm about the possible gargantuan task ahead of him.  

“We can see what needs to be done. But at the end of the day, it is just business. 

“If we get Proton, we will do it. If we don't, we still have our own brand to take to greater heights,” he says.  

PROTON :  [Stock Watch]  [News

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