Proton Adviser Dr Mahathir Mohamad and former Proton Group CEO Tengku Mahaleel Tengku Ariff has a well-executed role-play today, firing double salvos at the current Proton management, point blank.
First, Tengku Mahaleel held court singularly by holding a press conference, and fielded question from the journalists. It was followed by a 13-page joint press release attributed to both gentlemen, a copy of which was made available to Screenshots.
Later, Dr Mahathir spoke to reporters after receiving former Iranian President Mohammad Khatami, commenting on Mahaleel's remarks.
- They questioned Proton's wisdom in selling MV Agusta for just one euro, saying that Proton lost of total of 75.99 million euros, or RM348 million from the sale.
Towards the end of the press conference, Tengku Mahaleel said in a tongue-in-cheek manner that if Proton were to sell Lotus for one British pound, then he and Dr Mahathir would like to register their interest to bid for it.
- Dr Mahathir extended the battlefront by expressing his disappointment that the Securities Commission (SC) is keeping quiet on the issue of Proton Holding Bhd's sale of MV Agusta for just one euro.
He said that the SC had the right to seek an explanation from Proton because in selling the Italian motorcycle maker, Proton "gave away almost RM400 million just like that in a manner that gave rise to a lot of questions."
And the famous last words from Dr Mahathir: "You give it away for one euro. And what are you going to do with that one euro?"
Mind you, the arsenal was factually scathing. It rocks the base of his former administration which Pak Lah inherited and has been trying to reshuffle in the past two years -- without much success.
UPDATES: Chips Yap of Motor Trader & Autocar Asean has a full report of the Mahaleel press conference.
Backgrounder: Proton bought a 57.75% stake in MV Agusta for 70 million euros in December 2004 when Tengku Mahaleel was its Group CEO. Tengku Mahaleel retired in Sept 30, 2005.
A summary from extensive coverage by Bernama:
How Mahaleel hits out at Proton for lack of details on Agusta sale
Tengku Tan Sri Mahaleel Ariff criticised Proton Holdings Bhd for not replying to his queries and that of Tun Dr Mahathir Mohamad late last year over its sale of Italian motorbike maker MV Agusta for just one euro, saying they both regretted Proton's stand that the company's reply to Bursa Malaysia was already sufficient. Excerpts:
"Firstly, as a matter of public interest, not all are privy to Proton's reply and secondly the reply does not answer to the questions that we posed.
"By not replying in itself is a transparency of falsehood contrary to the wishes of the government to be transparent for all to see."
Tengku Mahaleel said that since he and former Prime Minister, who is also advisor to Proton, had raised the questions, "many public and business circles are amazed as it (the sale of MV Agusta) defies from an outsider's point of view many business practices."
He also questioned who made the decision to sell and whether it went through the proper process.
Among his other queries were that whether an announcement as made that MV was for sale and if not, why did Proton approached only one bidder; who were the consultants appointed for the sale; was the MV Agusta board consulted and informed of the sale and was the chairman and chief executive officer of MV Agusta present at the Proton board meeting to argue the case for the sale.
He questioned Proton's wisdom in selling MV Agusta for just one euro, saying that Proton lost of total of 75.99 million euros or RM348 million from the sale.
"In fact, when acquiring MV Agusta, we were also asked to look at acquiring another Italian bike maker, Ducati," Tengku Mahaleel revealed.
"In conclusion, Proton has sold one of its core assets rather than non-core assets," he claimed.
Tengku Mahaleel pointed out that the automotive core businesses, would among others, involve assembling and logistics, casting and machining engines and related parts, mould and dies making, styling clay and design engineering, stimulation and prototype building, vehicle testing, distribution and dealership.
He said M.V Agusta "does all those activities and has the world's best designers and has won world awards and patents than all of Proton in its 20 years of existence."
Asked if MV Augusta was sold because it was a motorbike company and not a car maker, he countered by saying: "In the context of assets, it's very simple. Isn't Honda Motorcycles core to Honda, yes or no? Isn't BMW Motorcycles core to BMW? The answer is there because the core is in the process."
Explaining the rationale behind MV Agusta's purchase, Tengku Mahaleel said Proton faced an uncertain future in Malaysia with auto policies that were inconsistent and sometimes not transparent.
To survive, it "needs a few large based markets (and) Malaysia is one of them. We were looking 10-15 years ahead," he said.
Among the advantages of the MV Agusta acquisition was that the group had three top brands namely, MV Agusta, Cagiva and rights to Husqvarna.
With this, he said Proton would have five brands (including Lotus) for its future market entries, four high-end premium brands and one standard.
He also claimed that profits per unit from Lotus or MV Agusta was higher than each Proton car.
"If Proton can raise sales of Lotus and MV Agusta to 60,000 to 80,000 units, it can earn as much money as selling 150,000 Protons per year. This is why Lotus and MV Agusta are critical to Proton's future," he claimed.
Proton, he said, had spent almost RM1 billion in advertising and promotions in building its brand globally "but selling Lotus and MV Agusta does not require such a heavy advertising and promotions cost, thus saving market entry cost."
Mahaleel: MV Agusta not wholly responsible for Proton losses
Tengku Mahaleel says that Italian motorcycle manufacturer M.V Agusta was not wholly responsible for losses registered by the national carmaker.
He said Proton's loss in its first quarter of 2005 was RM12.4 million and this was due to provisions of RM137 million.
He claimed that MV Agusta's provision was only RM45 million and questioned how the balance of the RM92 million in provisions had come about.
He also referred to losses of RM154.3 million for the second quarter ended Sept 30, 2005 which were attributed to provisions of RM161 million.
He claimed that even if the M.V Agusta provision was prudent in the second quarter, there was still RM70.5 million being provided for.
Tengku Mahaleel said a close scrutiny of Proton's financial results revealed that its revenue dropped by RM400 million, unsold stocks in October 2005 totalled 24,000 units at RM40,000 each, which cost RM900 million worth of holding stocks.
He said Proton's cash flow also turned negative to RM481 million from a positive cashflow of RM339 million in the previous year, a drop of RM820 million. "It is the first time the cash flow has dropped. Something is amiss in the company."
Tengku Mahaleel also said that cash reserves plummeted to RM975 million in Q2 2005 from RM3.076 million in Q2 2004 -- a drop of RM2.07 billion.
He claimed that the cost of MV Agusta's financial position to Proton as at Oct 30, 2005 (from M.V Agusta's seven months accounting in Proton from April to October 2005) was a loss of RM48.3 million and total liabilities as at Oct 2005 was RM111 million.
At a calculation of 57.75%, the percentage of Proton's ownership in Agusta, then the share of losses would only amount to RM28 million while a 57.75% share of the liabilities totalled only RM64 million.
"So, how do we explain that M.V Agusta was a drain on Proton's earnings, which was down by RM166 million when it (Agusta) only contributed RM28 million?" Tengku Mahaleel asked.
"How do you explain that Proton had an operating loss of RM7 million in second quarter ended September 2005 before research and development charges of RM124 million and before other provisions?" he again asked.
Tengku Mahaldel said M.V Agusta's pre-tax profit forecast for 2006 as adjusted by Price WaterhouseCoopers was RM73 million (best case), RM34 million (base case) and RM31 million (worst case).
Its profit forecast for 2010 was RM228 million, he claimed.
"It is apparent that M.V Agusta can be a money spinner for Proton in medium term," he said, adding that M.V. Agusta could make small engines in the 850cc to 1,000 cc range being used by Proton Savvy instead of having to buy them from Renault of France at present.
He even claimed that M.V. Agusta could make a car for just RM10,000 each.
Q&A with Tengku Mahaleel
Q1: Why are you lobbying for MV Agusta right now after it has been sold?
A1: Here, we are trying to clarify our (me and former Prime Minister Tun Dr Mahathir Mohamad's) positions because the inference is that we made a bad decision (in the purchase). When we purchased Agusta, people were asking why we bought (in the first place).
Q2: You are saying this to clarify your connections (to the Agusta purchase), not to question Proton's decision (to sell)?
A2: Proton can do whatever they want. It has nothing to with me anymore. Many people in the market are saying, the papers are (also) saying that Tun Dr Mahathir Mohamad made that decision (to buy), I made that decision (to buy), we were the key people.
Q3: With this, how do you see the future of Proton (after the Agusta sale)?
A3: We can make another press conference on this. Today, we concentrate on this (sale of Agusta). I know all the strategic plans because I wrote them.
Q4: Maybe you want to comment on Mitsubishi (having renewed its partnership with Proton)?
A4: No.
Q5: At that time when you considered purchasing MV Agusta, did you have discussions with Tun (Dr Mahathir)?
A5: It is (about) the pros and cons why (Proton) we need to diversify (and) why we need to (go) downstream.
Q6: Did he share his opinion?
A6: As the advisor, he saw the dangers that Proton was facing and he knew both the parties and all the papers (related to the Agusta purchase) were given to the board.
Q7: His view then; was it worth the risk?
A7: He even went to see MV Agusta.
Q8: I think the process of buying MV Agusta started in 2002, when Tun was still PM?
A8: At that time we did not put in to him yet.
Q9: A motorcycle magazine has described the squabble over the sale of Agusta as not very good.
A9: It is not very good for Malaysia. If you look at Proton's stock price today, what is it trying to tell you? When I left, they all said ''Oh, it went up to RM9, very good.'' During my time it (hovered) between RM7 and RM7.50. Now it's RM5 something. I think the business world realises this and has make a judgement on this.
Q10: What is your next recourse?
A10: The important thing is we want to clarify (our positions). First ourselves. We have been judged and sort of inferred to as being party to this (transaction) that made the bad decision. Because we asked for the reason (for the sale), because this is of national interest. I think it is very important for the public to know this, the real reason to the process (for the sale). We will see how they (Proton) respond. The public needs to know.
Q11: You showed all the charts of Agusta's presence worldwide. Was it your thought to use this to sell Proton?
A11: Oh yes. In fact, the Brazil connection (through Agusta) was to try and get the manufacturing of (Proton) there. And the US distribution (channel) was a piggyback (ride) for Proton and Lotus.
Q12: Why did you not make a briefing before the sale of Agusta?
A12: I didn't know (about the sale). In the context of whether it (the sale) will help or not, the business world itself was surprised at the speed and transparency. Why didn't (Proton) listen to the shareholders of MV Agusta and its CEO? They were not even allowed (to attend the meeting on the sale). I just want to clear my name. I didn't know they wanted to sell for I was (already) out of the company.
Q13: Can you comment that shortly, after the sale of Agusta, there was talk in the market that repayment of Agusta's debts amounting to a large sum was urgently due by November 2005 and if it was not settled, Proton will become liable.
A13: You can always negotiate. The key points of negotiations are whether you are on target. The bank would love to mend (the loan) if you know how to give feedback.
Q14: Agusta probably was not a core asset, maybe because it was not in the car business?
A14: In the context of assets, it is very simple. Are Honda Motorcycles core to Honda, yes or no? Are BMW Motorcycles core to BMW, yes or no? The answer is there, because the core is the process I told you. Honda can make an aeroplane engine. That is core.
Q15: What is the holding stock (unsold stocks) of Proton during your time? Early last year?
A15: I don't have the figures, I need to check them. Basically, I have warned the board that we were too involved in meetings, which were about 10 meetings in a month. We don't know what was happening in the market place.
Q16: What about Proton's holding stocks currently?
A16: I was informed that 30,000 over units, of which 18,000-19,000 were from 2005. It is a whole lot of money, you calculate.
Q17: What is the Lotus profit right now that Proton had bought it? Is it profitable?
A17: I don't have the latest figures. I think they either break even or are making money now. Their whole programme has to double that volume, that's when the money comes in. So, that's why all the engineering has been going on for the last two over years. Their new product is coming out.
Q18: But you do really know if Lotus broke even?
A18: I don't have (the figures). You need to check with them.
Mahathir says SC can seek explanation on Agusta sale
Dr Mahathir expressed disappointment that the Securities Commission is keeping quiet on the issue of Proton Holding Bhd's sale of MV Agusta for just one euro.
He said that the SC had the right to seek an explanation from Proton because in selling the Italian motorcycle maker, Proton "gave away almost RM400 million just like that in a manner that gave rise to a lot of questions."
"They say that SC is supposed to be studying this matter but until now there has been no comment from the SC, as if the matter is so sacred that nobody can comment on it."
Dr Mahathir said: "You sell at the price of one euro. Did you tell other people that you are going to sell? Were there other bids, was there only one bid? A lot of questions need to be asked."
Early this year, Proton issued a statement stating that it has made the necessary announcement to Bursa Malaysia with regards to the transaction on MV Agusta Motors and therefore it will not issue additional statement on the matter.
Concurring with Tengku Mahaleel's remarks that Proton lost a total of 75.99 million euros or RM348 million from the sale, Dr Mahathir said: "Obviously it was something that was done not even in the correct way, to give away RM400 million. Now the chance to recover the money is gone as it (MV Agusta) had been given away."
In disagreeing with criticisms that the purchase of MV Augusta when he was prime minister was a "stupid" move, he said the decision to buy the Italian company was not done overnight as it took 14 months to reach that decision.
"Here is a company that is relatively cheap and we know their capacity. But someone easily said that it is up for sale for just one euro. I can't imagine..." he said.
Dr Mahathir further said that someone who did not understand engineering would not be able to run an automotive company. This is why the matter should not only be seen in terms of financial but also technological losses.
"If you want technology, you take a partner who has the technology. If you can buy the technology, you buy the technology. Other countries are all buying technology," he said.
Describing MV Agusta as the best motorcycle company in the world, Dr Mahathir said:
"In the world of motorcycle, this is the Rolls-Royce, and you give it away for one euro. And what are you going to do with that one euro?"
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