Who are  responsible for the RM510 million Agusta losses of Proton – Mahathir and Mahaleel or  the present Proton Management  Board or both parties?

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Media Statement
by Lim Kit Siang  
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(Parliament, Wednesday): The immediate public reaction last week of the “black hole” in Proton Holdings Bhd in the disposal of its 57.57 per cent stake in MV Augusta to Italy’s Gevi SpA for RM4.48 (one Euro) after dumping RM510 million on the investment in less than a year is one of anger and outrage.

The anger and outrage were not so much over the divestment of the Italian motor-cycle unit, as the wisdom and propriety of this Proton acquisition  (just like the Lotus acquisition) had been questioned  right from the beginning, but at the rather cavalier and irresponsible way of disposing it, seemingly reckless of the colossal  losses  of RM510 million in one year which have finally to be borne by the Malaysian taxpayers. 

(The RM510.24 million figure, which appears in Proton’s cash flow statement in its 2005 annual report, include the acquisition price of 70 million euros or RM367.68 million and further RM142.66 million presumably for financial assistance.)

When announcing the Proton’s net loss of RM154.33 million for its second quarter ended Sept. 30, 2005, Proton chairman Datuk Mohammed Azlan Hashim said on November 29, 2005 that  MV Agusta’s debts and accumulated losses had significantly affected Proton’s finances since it took over the unit in December 2004.

He said due diligence on MV Agusta had been conducted at the time of the purchase and the management board had approve it on the basis of information presented to them.

He said: “From a financial perspective, however, the investment has not met expectations. From the viewpoint of technology transfer, this too has not been realized so far.”

Last week DAP Secretary-General Lim Guan Eng had asked Proton Adviser and  former Prime Minister, Tun Dr. Mahathir Mohamad to explain his support for former Proton CEO Tengku Tan Sri Mahaleel Tengku Ariff’s disastrous Agusta investment costing Malaysian taxpayers RM510 million in less than a year.

With the joint statement by Mahathir and Mahaleel yesterday questioning the rationale behind the Proton sale of MV Agusta for one euro (RM4.48), the question uppermost in the minds of Malaysians is: Who are responsible for the RM510 million Agusta losses of Proton – Mahathir and Mahaleel or the present Proton Management  Board or both parties, and if so, in what proportion?

The  new 2M of Mahathir and Mahaleel have asked questions which the Proton management board owes the public an answer if Proton is now to be a model Government-linked company  (GLC) practicing good corporate governance and upholding accountability and transparency, but there are also questions which Mahathir and Mahaleel must also account to the Malaysian public  because of their previous responsibilities.

The 2M asked eight specific questions about the sale at one euro of MV Agusta which was bought at 70 million euros, which must be answered by Proton, viz:

• Who offered to sell or who offered to buy at one euro?  
• Were there other bidders?  
• Was there an attempt to get the buyer to pay a higher price?  
• Was there an announcement that MV Agusta was up for sale? 
• If not, did Proton approach only one bidder? 
• If other bidders were offered, did they reject? 
• Who in fact made the decision to sell? 

Can Proton explain how selling an entity bought at 70 million euros for one euro would not cause Proton to lose money as is claimed? 

The 2M also revealed hitherto unknown-information about Proton which should be in the public domain, as Malaysian taxpayers who are the stakeholders of the national car are entitled to know, viz:

·     That the 232 million euro Agusta debts need not be paid immediately by Proton  as it  had been frozen for three years – which make the one euro disposal of MV Augusta by Proton even more indefensible and unacceptable.

·     The 2M’s estimate of some RM108 million losses by Proton as a result of sale of 54,000 cars in three months with rebates and large discounts which include free registration, free insurance, free first instalment payment for three months and free service, working roughly to a discount per car of around  RM2,000 or more.

The Proton management board cannot continue to keep mum on these questions and issues.

Mahathir and Mahaleel however must owe up to their responsibility to give a proper accounting about the wisdom and justification for the original acquisition of MV Agusta – a duty which must be shared by the Proton Management Board members who had given their approval in 2004.  The due diligence conducted on the acquisition of MV Augusta at the time should also be made public.

At the same time, the Proton Management Board should give a separate accounting as to how from the financial and technology transfer perspectives, the MV Agusta acquisition had failed to live up to expectations during its one-year ownership and control.

(04/01/2006)