Proton, Malaysia’s national carmaker, has perhaps had the most suitors and failed courtships of any carmaker on the planet.
All these years the local and foreign suitors could not strike a deal that was a win-win for both parties, be it for a share sale or a joint venture. Each had stringent rules and each wanted its own way.
So when talk emerged recently of Proton and Honda having a quiet chat, many raised their eyebrows.
A Japanese suitor this time around is new. There have been European suitors, notably the long-running, on-again, off-again affair with Volkswagen, an Indian party, a Chinese party and others too.
Proton began its journey nearly three decades ago as Malaysia’s national car company.
It has continued to give Malaysians a choice to own an affordable car. Because of its existence there is a strong vendor support network that depends on Proton for survival.
Proton until early this year was majority owned by the government’s investment arm, Khazanah Nasional Bhd.
After failed attempts to get a strategic foreign partner for Proton, and with Proton bleeding profusely for many years, Khazanah decided to part with the carmarker.
The beneficiary was DRB-Hicom Group, a company controlled by billionaire Syed Mokhtar Al-Bukhary.
DRB-Hicom has various businesses and has seven car marques under its belt because it has a thriving car business.
Honda is a partner because DRB-Hicom has a 34% stake in Honda Malaysia. The other six are VW, Suzuki, Audi, Mahindra, Isuzu, and Mitsubishi.
Early this year DRB-Hicom bought Khazanah Nasional’s Proton stake for 1.29 billion ringgit and subsequently took over the company in May for RM3 billion.
Since taking over, DRB-Hicom has undertaken a restructuring to pare down Proton’s debt.
But even DRB-Hicom has from the onset been talking about a foreign strategic partner.
In less than five months it has announced a deal with Honda for Proton. Last week Proton signed a deal with Honda, the intent being to address some of Proton’s current weaknesses, but no details were given on the partnership.
Sales of Proton cars have been flat and DRB-Hicom, after spending RM3 billion, needs to get Proton resuscitated, as its survival is key for the national auto industry.
The tie-up with Honda also opens the doors for more partnerships and ties up with other carmakers. In any case, DRB-Hicom is in a hurry to see the returns on its investment.
But the Honda tie-up also raises questions because Proton has had a long relationship with another Japanese carmaker, Mitsubishi Motor Corp. What happens to that deal with Honda now in the front row?
Mitsubishi was an investor in Proton when the Malaysian carmarker started off in 1983. The first few models including the Proton Saga and Proton Wira were based on Mitsubishi’s platform. Though not so active, Mitsubishi is still there.
How that relationship will be managed remains to be seen.
What triggered Honda to partner with Proton is not clear but reports suggest that the severe floods that affected its plant in Ayutthaya in Thailand and disrupted Honda’s global supply chain had led Honda to look elsewhere.
Whether Honda will use Proton’s facilities at the one-billion-ringgit Proton City plant in Tanjung Malim remains to be seen. There is ample capacity there as the plant is severely underutilised.
What Proton needs is a lift and Honda can provide that. There again, DRB-Hicom has solid relationships with six other makers including VW and the market is now speculating again that a tie-up between Proton and VW is possible because the circumstances now are different from those of 2007, when the two first began talking before they decided to part ways.
In the final analysis, Proton needs a partner, and the partnership should be about progress for Proton. It is time for Proton to use the Honda deal to transform itself into a carmaker that can export its products widely instead of continuing to focus only on the domestic market.