SHAH ALAM (Aug 30): DRB-Hicom Bhd is still in talks to conclude the business plan for the the joint venture between the national car and China's Zhejiang Geely Holding Group Co Ltd.
The conglomerate’s CEO hope that the business plan will be finalised by the end of 2018.
"We are in talks with Geely, we've already started working on the business plan though we still have a lot more work to do in terms of deciding on the local content and investments needed," DRB-Hicom's group managing director Datuk Seri Syed Faisal Albar Syed Albar told reporters on the sidelines of the group's extraordinary general meeting this afternoon.
The long negotiation period raises eyebrows as Proton is financially stressed.
DRB-Hicom and China's Zhejiang Geely Holding Group Co Ltd signed a definitive shareholders agreement in which the latter will acquire a 49.9% stake in Proton Holdings for RM460 million.
Of the total consideration, Geely will provide a cash injection of RM170 million to Proton. The balance RM290 million will come from transfer of Geely's platform for its best-selling vehicle, the Boyue SUV, to the ailing automotive company.
On the national car’s financial performance, Syed Faisal said it would take time for Proton to be revived.
"The turning around of Proton would take some time. It's a journey. But what Geely would help immediately would be to reduce costs of doing business as they have the economies of scale," said Syed Faisal
DRB-Hicom posted a net loss of RM169.71 million in the first quarter ended June 30, 2017 (1QFY18) compared with RM169.3 million a year ago.
The conglomerate’s net loss did not widen thanks mainly to smaller losses from Proton Holdings and higher profit contribution from its subsidiary Pos Malaysia Bhd.
On whether the group would want to increase production of car units, Syed Faisal said increasing production is not necessarily the answer to generate more profit.
"For example the SUV Boyue...we want to to bring it as soon as possible but even then it will only be by end of next year or 2019 so a 'turnaround' would take time," he said.
"Some of the global automakers turn around sometimes without even introducing new models so this is something we are looking at, though he did not discount the possibility of introducing new models in the future.
At today’s EGM, DRB Hicom has obtained the greenlight from shareholders to proceed with the disposal of Proton Holdings stake and Lotus to Geely.
Beside the 49.9% stake in Proton, Geely together with Etika Automotive, a firm controlled by Malaysian tycoon Syed Mokhtar al-Bukhary, will acquire Proton’s sports car unit Lotus, which will be sold separately, for £100 million.
The agreement fulfilled Proton's requirement to acquire a strategic partner as a condition imposed on them by the government for the approval of a RM1.5 billion soft loan to the company.
The first new Proton model to be introduced following the Geely stake purchase will be the Boyue, a sport utility vehicle (SUV).
DRB-Hicom's share price closes at RM1.58 today with market capitalisation of RM3.055 billion. The stock has gained 37.4% year to date.