DRB-Hicom to finalise foreign partner for Proton by 1H2017

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KUALA LUMPUR (Feb 7): Diversified group DRB-Hicom Bhd, which is controlled by local businessman Tan Sri Syed Mokhtar Al-Bukhary, will be finalising a foreign strategic partner (FSP) for its wholly-owned automobile maker Proton Holdings Bhd by the first half of 2017.

In a statement today, its group managing director Datuk Seri Syed Faisal Albar said the potential FSPs have conducted their own due diligence on Proton over the past weeks, and DRB-Hicom is now waiting for the submission of bids from them, after which an evaluation will commence.

"Also as stated previously, we aim to complete the selection by the first half of this year, although we strive to conclude it earlier and this remains the target for DRB-Hicom," he said.

Earlier this month, local media reported that Chinese automaker Geely Automobile Holdings Ltd is reportedly leading a three-way race to be the technical partner for Proton Holdings Bhd, ahead of French carmakers PSA Group and Renault SA.

It was also reported that Geely and PSA are interested in acquiring a 51% stake in Proton's manufacturing plant in Tanjung Malim, Perak.

Today, Syed Faisal said DRB-Hicom's search for a FSP for Proton is a critical exercise to ensure the sustainability of the national carmaker.

"We have stated before that we will maintain a significant equity in Proton, and this has not changed. The FSP search is not about shirking our national responsibility but about enhancing Proton as a bona-fide carmaker, and eventually putting them, and Malaysia, on the global map," he said.

Syed Faisal said DRB-Hicom will also assess the intention of the potential FSPs in utilising the current "home-grown" vendor network.

"This is a very significant element in our evaluation, as DRB-Hicom, who also own subsidiaries serving Proton as vendors, would avoid for these 'home-grown' network to be diluted substantially," he explained.

Syed Faisal said the entry of a FSP will enable Proton to revitalise itself through access to new platforms, powertrains and technologies, which will further improve the carmaker's range of products and its quality.

This revitalisation of Proton's market share, according to him, underlines DRB-Hicom's intent to keep the brand as a player in the automotive market.

Therefore, Syed Faisal said DRB-Hicom remains committed to revive Proton's fortunes, and finding the right FSP is critical to that goal.

In finding the right FSP, he said DRB-Hicom will evaluate three key criteria, namely strategic, operational and cultural fit.

"A strategic fit will enable both parties to derive tangible benefits from the range of technology and products available, which will complement each other's needs in their own markets," Syed Faisal said.

"This strategic fit will also ensure that Proton can achieve economies of scale from its domestic operations," he added.

In evaluating the potential partners, Syed Faisal said DRB-Hicom will insist that the Proton badge and its technology will be expanded into Asean markets first and global arena subsequently.

Meanwhile, he said an operational fit with the FSP ensures that both Proton and the partner will complement each other's strengths.

"The structures that exist within each company must be able to blend well so as to achieve seamless operation at Proton and the partner themselves," he said.

Syed Faisal also said a cultural fit will ensure a successful union, adding that the "chemistry" between the two parties will be critical in pushing Proton forward while enhancing the FSP's own operations together with their short- and long-term plans.

"These criteria are aimed at ensuring that both parties will be able to achieve each other's strategic targets as quickly as possible and with minimum interruptions to business operations," he said.

On the other hand, Syed Faisal said Proton has plenty to offer to the eventual FSP and one of the immediate advantages available to any carmaker partnering with Proton is the ability to immediately increase their production capacity through the company's Tanjung Malim Plant in Proton City.

"The plant has a low utilisation rate presently, and optimising the use of the modern facility will also benefit the local workforce. This means Malaysians can benefit from increased employment opportunities with full capacity utilisation at the plant," he said.

DRB-Hicom was trading at RM1.29 as at 4:23pm today, up one sen or 0.79%, valuing it at RM2.49 billion.