[lbo-talk] GM has shown interest in Proton, Malaysia says

uvj at vsnl.com uvj at vsnl.com
Mon Jan 15 17:02:39 PST 2007


Reuters.com

UPDATE 2-GM has shown interest in Proton, Malaysia says http://today.reuters.com/news/articlebusiness.aspx?type=CARMFG&storyid=2007-01-15T093950Z_01_KLR6758_RTRIDST_0_PROTON-GM-UPDATE-2.XML&WTmodLoc=InvArt-R2-IndustryNews-3&from=business

Mon Jan 15, 2007

(Adds analyst comments)

By Hsu Chuang Khoo

KUALA LUMPUR, Jan 15 (Reuters) - General Motors Corp (GM.N: Quote, Profile , Research), the world's largest automaker, is interested in Malaysia's state-controlled auto firm Proton Holdings (PROT.KL: Quote, Profile , Research), Malaysia's second finance minister said on Monday.

The comments by Nor Mohamed Yakcop, which confirmed newspaper reports that GM may bid for the loss-making firm, pushed Proton shares up as much as 10 percent to a 13-month high. By 0738 GMT were 6.3 percent higher at 6.80 ringgit.

The Business Times said on Saturday that GM was prepared to offer as much as 10 ringgit ($2.85) for each Proton share, a premium of nearly 50 percent to Monday's price and valuing the Malaysian firm at $1.6 billion, if the U.S. firm is given control of Proton's finances and manages its vendor system. But that's too rich a valuation for Proton, one analyst said.

"That's too gung-ho," said Vincent Khoo, head of research at Mayban Securities in Kuala Lumpur. "Proton's book value cannot be matched by its current earnings generation."

Proton, long a beneficiary of state protection, is losing local market share and struggling in export markets against South Korean and Japanese competitors.

Nor Mohamed declined to give details about GM's intentions but noted that France's PSA Peugeot Citroen (PEUP.PA: Quote, Profile , Research) and Germany's Volkswagen (VOWG.DE: Quote, Profile , Research) were also interested in Proton.

"Let me put it this way; GM has shown interest in Proton, and if they put in a bid we will consider it," Nor Mohamed told reporters.

"There are three of them now who are foreign companies that are interested and they come in different forms and proposals. Now we are finalising the discussions and the comparisons, they are not identical interests," he said. GM planned to submit a bid for Proton this week, the Business Times reported, quoting sources familiar with GM's operations in Malaysia.

Malaysia's government controls Proton through its state-investment firm Khazanah Nasional Bhd., which owned 42.74 percent in the carmaker as of Dec. 8. It is also controls an undetermined additional amount of Proton through direct and indirect holdings held by other state firms and agencies. Proton posted lost 250.3 million ringgit ($69.05 million) in the three months ended Sept. 30, its fourth quarterly loss in less than two years as a slump in its car sales worsened.

CHEAPER PRODUCTION BASE

Analysts say the problems at loss-making Proton could be solved by forging a foreign partnership.

One attraction for GM could be Proton's state-of-the-art production facility in Tanjung Malim, Khoo said.

But he doubted GM wanted to use Malaysia as a lower-cost centre to develop car parts because China was more competitive.

"It's a lot cleaner to come in at manufacturing level, where it's not just about the cheapness. It's also about the plant configuration, flexibiltity and the efficiency, which is superior to Thailand or China " Khoo added. However, others said Malaysia could offer GM, Peugeot Citroen and Volkswagen a cheaper production base.

"We have to see what is best for us, for Proton, for the nation and for the auto industry," Nor Mohamed added.

GM is in its second year of major restructuring. It is expected to be challenged by Toyota Motor Corp. (7203.T: Quote, NEWS , Research) for the top spot in global sales this year.

Having lost $10.6 billion in 2005, GM is slashing more than 34,000 jobs and closing 12 plants in its loss-making North American operations. In the first three quarters of 2006, GM lost $4.8 billion, including a $3.7 billion charge for job cuts.

Nor Mohamed had said on Friday that initial discussions with various local and foreign suitors, including Volkswagen and Peugeot Citroen, for a strategic stake in Proton had ended.

The government was now evaluating the proposals and would make a decision soon.

"The Malaysian government needs to bite the bullet," Khoo said. "They can sell up to 49 percent of Proton without losing political sway. That's what they have done with Perodua," Malaysia's second national carmaker.

© Reuters 2007. All Rights Reserved.



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