KUALA LUMPUR/BEIJING Geely [GEELY.UL], the owner of Sweden's Volvo Car Group, on Wednesday said it would buy 49.9 percent of struggling Malaysian carmaker Proton from conglomerate DRB-HICOM Bhd (DRBM.KL), marking the Chinese automaker's first push into Southeast Asia. Core markets here, reports Automotive News, are the right-hand drive regions of Malaysia, India, Australia - and, of course, the UK. DRB-Hicom said in a February statement that a new partner would help improve the utilization rate at the Tanjung Malim plant.
The fresh cash injection means the troubled 30-year-old Proton brand gains a stay of execution, and can even potentially one day spin off a more premium sub-brand similar to the Geely-owned Lync and Co that will use Volvo's latest compact modular architecture underpinnings to build luxury SUVs.
Also present at the signing ceremony was Second Finance Minister Datuk Seri Johari Abdul Ghani, who clarified that with the partnership with Geely in place, Proton would need to repay its RM1.25 billion (S$400 million) soft loan from the Government.
The decision by China's Geely to take a majority stake in Lotus Cars is great news for the unprofitable British sports-car maker.
Malaysian carmaker Proton finally landed a foreign partner in Chinese automaker Zhejiang Geely Holding, but not all analysts were convinced the deal marked a turnaround point for the one-time national powerhouse. In the last few years, Proton has only been operating at 40 per cent of its full capacity.
Beyond just finding efficiencies, Geely CFO Daniel Donghui Li says that his company wants to "unleash the full potential of Lotus Cars".
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Describing Proton as his "child", he stated that with the done deed, "Proton can no longer be national" and that any success it experiences is nothing to be proud of, as it doesn't "belong to me or my country". "Lotus, which was bought over by Proton in 1996, has been struggling financially", he said.
The sale of the minority stake underscores the Malaysia's determination to maintain Proton's "national vehicle status", although Geely will have a significant influence over the carmaker's direction, including representation on its management board. The Lotus deal, worth the equivalent of $129 million, will see Geely take 51 percent and Etika Automotive, a body and engine manufacturer owned by Malaysian billionaire Syed Mokhtar Al-Bukhary, take the remainder.
Proton was founded in 1983 during an industrialization push of former prime minister Mahathir Mohamed.
The deal also reflects the growing political warmth between China and Malaysia, as Beijing seeks to expand its regional influence through trade and military ties.
Geely aims to produce three million cars by 2020.
'Geely is the biggest vehicle maker you've never heard of - and it has a huge stake in Britain's future, ' a finance blog in United Kingdom described the sudden entry of the carmaker in their nation.