KUALA LUMPUR, May 27 — There will be a short period of difficulty ahead following the 49.9 per cent stake in national carmaker Proton Holdings Berhad to China’s Zhejiang Geely Holdings Group this week.
But economists contacted by Malay Mail Online predict that the deal will ultimately lead to a win-win situation for both parties in the long-run.
Proton’s vendors could suffer some short term setbacks as the cooperation with Geely could lead to some restructuring in Proton, said Lee Heng Guie, an executive director at the Socio Economic Research Centre at the Associated Chinese Chambers of Commerce and Industry Malaysia.
“There will be short-term pains, but they are for long-term gains,” he said.
“The challenge is in term of infusing management skills, increasing productivity and also looking at the vendor development programme. If the new management feels there is a need to restructure, there will be some short term pains,” he added.
He said that if the vendor development programme is deemed in need of restructuring, Proton and its employees would need to “bite the bullet” in order to move forward.
He also said that a drastic change in Proton, which recently received financial aid from Putrajaya to pay its vendors, is “no longer a choice” and the local carmaker is badly in need of rejuvenation.
However, Lee pointed out that the cooperation with Geely could expand Proton’s presence in the regional market as Geely had a track record of having turned around the sales of Swedish carmaker Volvo, after buying the company from US-based Ford.
Economics professor Yeah Kim Leng of Sunway University said that challenges from the joint-venture would include integrating Proton’s vendors into a regional and global supply chain created via the venture.
“A win-win joint-venture can be forged if Geely is able to capitalise on Proton’s production capacity and raise its domestic market share while leveraging more on Lotus’ engineering capabilities to be a global car player,” he told Malay Mail Online.
He said the potential of the deal will be realised if Geely is able to set up a hub to penetrate the Asean Economic Community which also will increase Proton’s regional footprint.
He also said that the concept of a national brand is “less relevant”, citing established car brands in the United Kingdom and Europe which have “disappeared” over the years.
The deal with Geely had also raised concerns about Proton’s stature as a national car, though DRB-Hicom still retains 50.1 per cent share in Proton.
ISEAS-Yusof Ishak Institute deputy director Ooi Kee Beng said that there will be some winners and some losers from the deal.
“As with any big change, some will win and some will lose, either face or employment or contracts. Geely bought a company that was not making profits, so they must have a strategy to turn things around or an idea that it is a profitable purchase in some way,” he told Malay Mail Online.
He said that some vendors might lose out from the deal but there will be those who will reap the benefits if Proton becomes a profit-making company.
“One can expect huge changes in whichever case, and many vendors will lose out of course. In the medium-term, others will win if Proton becomes a money-making company,” he added.
He said that the assumption is that Geely “knows what it is doing” from a business perspective, but might not be clear about local sensitivities which will present problems that the new management has to handle.
“These problems will be largely political in nature,” he said.
He also stressed that Proton will remain a Malaysian brand as long as it is made in Malaysia.
