Proton and EON deny report on termination of distribution deal


EDARAN Otomobil Nasional Bhd (EON) and Perusahaan Otomobil Nasional Bhd (Proton) have refuted yesterday a newspaper report that the long drawn out negotiations over their distribution agreement had been terminated. 

“The report that Proton may be giving up talks with EON and may terminate a memorandum of agreement (MOA), as well as speculation that Proton may buy over EON's distribution and after-sales service network are incorrect and purely speculative,'' Proton said in response to an MSEB query.  

Proton's share price fell 5 sen from Friday's close to end at RM9.75 on volume of 2.03 million shares traded. 

However, the speculation hit EON's share price worse, the stock falling 35 sen to RM8.45.  

Dealers said concerns about EON's future earnings had weighed heavily on the stock despite the price surge since the launch, on Feb 6, of Proton's next generation model.  

In a report on EON yesterday Mayban Securities said: “The negative sentiments and the uncertainties surrounding the company (EON) may assert downward pressure on the stock price in the near term.'' 

EON, in a separate reply to the MSEB, said: “The MOA is a legal and binding document and can only be superceded by the execution of a definitive super dealership agreement.''  

Responding to reports that EON was not distributing the Gen.2 model, EON said it had placed orders with Proton Edar and was awaiting supply of the new cars. 

EON also said there were no discussions on Proton taking over its distribution and after-sales service network. 

EON boasts of the largest auto dealership and after-sales service network in Malaysia with 179 sales branches and dealers, 37 service centres, 179 franchise service dealers and 92 parts dealers. 

Meanwhile, Proton unit Proton Edar Sdn Bhd has been aggressively expanding over the past 2 years with some 190 sales outlets, and has implemented the 3S concept of sales, service and spare parts for its newer outlets. 

Analysts said negotiations between EON and Proton had been going on for some time.  

Up to 2000, Proton had focused on car manufacturing while EON served as the main distributor for Proton cars. 

On Dec 21, 2001, Proton Edar came into the picture and started distributing Proton cars as well, taking EON head-on in terms of models for distribution. 

The 10-year distributorship agreement between Proton and EON that lapsed in January 2000 was not immediately renewed. 

Instead, Proton provided cars to EON on a “month-on-month” basis, and negotiations on a new agreement have since dragged on. 

On March 31 last year, both parties signed an MOA in which EON was accorded “super dealers” status and was to be allocated 100,000 cars per year. 

The dealership agreement was to be inked within three months, but disagreements over terms and conditions have resulted in a stalemate till today.  

 Stock Watch On EON Stock Watch On PROTON

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