Wednesday, 28 December 2011

Time Malaysia’s Proton took leave of Lotus

With state divesting itself of national carmaker, unprofitable British unit appears likely to be sold

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Guanyu 道 said...

Time Malaysia’s Proton took leave of Lotus

With state divesting itself of national carmaker, unprofitable British unit appears likely to be sold

Bloomberg in Singapore and Kuala Lumpur
28 December 2011

James Bond stopped using Lotus as his vehicle of choice for fighting villains 30 years ago. Now investors say Malaysia’s Proton Holdings should follow suit and abandon the sports-car maker.

Proton, the Malaysian maker of sedans and taxis that bought control of Lotus in 1996, hasn’t made a profit from the British unit for 15 years and probably won’t at least until 2014. Now that Proton itself may be divested by its state-run parent, investors such as Gan Eng Peng say Lotus is ripe for selling.

“It will make sense for them to sell it,” said Gan, who helps oversee about US$3.6 billion as head of equities at HwangDBS Investment Management in Kuala Lumpur. “Proton and Lotus are not a good fit. They are in different market segments, both in terms of geography and product.”

Lotus, which has struggled to compete against Porsche and Ferrari in Europe, has hung on to relevance partly because of its decades-long expertise in designing lightweight frames. Still, the company may need the backing of a carmaker more global than Proton to survive in an industry where the likes of Saab are filing for bankruptcy.

Lotus has been the subject of this kind of speculation before. Shanghai Automotive Industry Corp (SAIC) this month denied a newspaper report that said it was interested in Lotus. And two months ago, Proton denied another claim that it was selling its Lotus stake to Luxembourg-based Genii Capital.

Lotus chief executive Danny Taner Bahar, formerly a Ferrari executive, says he is confident he can make the company break even by 2014 - if he receives the right financial backing.

“The only thing we can do is show the current owners, or the new owners, that we are absolutely in line with the business plan that we have presented,” said UK-based Bahar last week. “Without the funding support and the guarantees given by the Proton group, we would not survive.”

Lotus, whose cars were featured in the Bond movies The Spy Who Loved Me in 1977 and For Your Eyes Only in 1981, will continue to turn to its engineering strengths to stay competitive, Bahar added.

Expertise in making lightweight frames has made Lotus designs a popular option for electric cars. For example, Tesla Motors has relied on Lotus chassis designs since 2008 for its US$109,000 Roadster sports car.

The Lotus Elise weighs 2,010 pounds (912 kilograms), making it the lightest performance car sold in the US. The 2012 Porsche Cayman is 2,932 pounds while the Mazda MX-5 Miata sports convertible is 2,480.

“One of Lotus’ key attributes, part of the DNA, is to go the extreme in achieving the most intelligent and clever technological engineering,” Bahar said.

Proton’s stock has gained 44 per cent in Kuala Lumpur trading this month as speculation over a possible sale has mounted. State-owned Khazanah Nasional, which holds a 43 per cent stake, has since confirmed it has received offers but has declined to comment further. Sime Darby Motors, Naza Group, Hyundai- Berjaya, DRB-Hicom and UMW Holdings are said to be likely candidates, although Sime and UMW have stated they aren’t interested.

Former Malaysian Prime Minister Mahathir Mohamad, who founded Proton in 1983, said this month that DRB-Hicom, an assembler, was the best candidate to buy the government stake and that Proton shouldn’t be sold to a foreign company.

For Proton, whose profit tumbled 76 per cent in the latest quarter, unloading the UK unit may give it room to invest in production facilities as it faces mounting domestic competition from Toyota and Perusahaan Otomobil Kedua.

Lotus needs about 2.4 billion ringgit (HK$ 6 billion) in order to help it return to profit, according to OSK Holdings estimates. The brand may be worth about 1 billion ringgit, or triple its current value, once it’s profitable, according to Ahmad Maghfur Usman, an OSK analyst.

Guanyu 道 said...

For that to happen, Lotus will have to sell 8,000 vehicles a year, he said. The carmaker sold 1,985 units for the year ended March 31, according to its annual report.