PROTON Holdings Bhd is awaiting approval from the Indonesian authorities to acquire from the Lippo group a manufacturing plant near Jakarta, said chief executive Tengku Tan Sri Mahaleel Tengku Ariff.
He said the national car maker had identified the plant, which has an annual production capacity of about 40,000 to 50,000 units, about six months ago.
“We are now waiting for approval from the Department of Justice in Indonesia. We hope to get the approval next week,'' he told reporters after delivering his keynote address at Proton's products, quality and cost management seminar in Subang Jaya yesterday.
Mahaleel said Proton had already sent a manufacturing team to evaluate the production facilities at the Indonesian plant, and its legal and financial advisers were currently carrying out the due diligence process there.
He declined, however, to disclose how much Proton was paying for the plant. “Cheap cheap,'' he quipped when asked the price tag.
He said the acquisition would enable Proton cars to enjoy the minimal import duty imposed in the automobile sector under Asean Free Trade Area (Afta) agreement.
Under Afta, automobile manufacturers need to have production facilities in a least two countries for their cares to to qualify as Asean-made vehicles.
Mahaleel said Proton would be producing low-cost models, such as the Gen2 and Arena, in Indonesia to suit the relatively low purchasing power in the country.
The national car maker is sitting on a cash pile of nearly RM3bil. Analysts say this large cash reserve enables the company to expand overseas, which may help cushion the impact of losing market share at home.
The Lippo group is a diversified conglomerate whose core businesses range from financial services and property development to auto parts manufacturing and retailing.
It has 13 subsidiaries listed on the Jakarta Stock Exchange. The group's automobile division – PT Multi Prima Sejahtera Tbk (formerly known as PT Lippo Enterprises) – is involved in auto parts and motorcycle manufacturing. The group also has a joint venture with Japan's Mitsubishi group called called Lippo Melco Auto-Parts.
On the production of the Gen2 for the domestic market, Mahaleel said the output had doubled to between 3,500 and 3,800 units this month. However, there were still some production hiccups because some auto part suppliers were not able to ramp up their operations to meet rising demand.
Consequently, Proton had appointed new suppliers, including three cylinder-head makers, to help meet the additional orders, he said.
“We hope the supply (of auto parts) will stabilise soon. We are asking the suppliers to deliver at least 3,000 cylinder heads a month,'' he added.
On the criticisms that had been levelled against the Gen2, Mahaleel said: “The only problem we have with the Gen2 is supply (of auto parts). Our Australian supplier is not able to meet our orders.”
Asked about the launch of the Satria replacement model, Mahaleel said Proton needed to ensure an adequate supply of engines before rolling out the cars.