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Tuesday, September 19, 2006

Proton still has to deal with control issues

Proton Holdings Bhd may still have to deal with the issue of control before any collaboration with PSA Peugeot Citroen could be successfully realised, analysts said.

Proton signed a letter of intent with Peugeot on Sept 15 to study possible co-operation between them. The study, which will last several months, will focus on areas such as product development, quality initiatives, vendor development, contract assembly and distribution.

OSK Investment Research analyst Wan Azhar Mustapha said for such a collaboration to take off, Proton's major shareholder Khazanah Nasional Bhd, with a 38.32% stake as of July 20, 2006, may have to give up a controlling stake to PSA.

“A very sticky issue is regarding control. Definitely PSA would want to have some sort of control and it depends on Proton and Khazanah to sort it out. Volkswagen (AG) debacle is still fresh in everyone's mind,” he told FinancialDaily in a written reply.

Another analyst agreed that PSA would only share its technology if it holds a major equity in the national carmaker.

“In other cases, like the Proton and Mitsubishi (Corp) partnership, Mitsubishi is paying a fee for using Proton’s platform, of which does not do much for Proton.

“If Peugeot were to take a stake, you could see a similar arrangement to that of Perodua and Daihatsu. Then only could a decent platform be achieved and that would in turn help increase Proton’s market share,” she said.

Nonetheless, Wan Azhar said notwithstanding the control issue, Proton could benefit greatly from the cooperation, especially in product development via platform sharing and joint development.

He said a manufacturing contract would address the underutilisation of Proton's Tanjung Malim plant, which is running at about 15% capacity (150,000 cars annually versus one million capacity).

He said the existing platform of PSA vehicles could easily be adopted by Proton to create new models in a relatively short time.

He added that PSA’s extensive sales and distribution network globally could also help Proton make inroads into overseas market.

As for the diesel technology segment, in which PSA has a strong presence, Wan Azhar said Proton could use it as a basis to penetrate the European markets, where 50% of vehicles run on diesel.

“For Proton to regain its number one status in the country, more needs to be done. Products, quality, pricing and after-sales service are among the factors that could help Proton,” he said.

On whether the alliance would help to solve Proton’s bad brand perception, he said: “Quality issues are very subjective. Peugeot is not known as a leading carmaker in terms of quality and after-sales service but nonetheless, we feel that at least it is better than Proton.”


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What is the main factor for you to buy a Proton Car?
Low price and no other choice due to budget
Good resale value
Low maintenance cost
Ride & Handling is good
Reliable parts, chasis and engine
Good Styling exterior & Interior
Patriotism (I support Made in Malaysia Products)
Follow others (Follow Majorities should be the best choice)