PUTRAJAYA - The entry of a major Chinese carmaker into Proton Holdings Bhd will not only ease its financial woes, but also bring fresh capacity to the group's underutilised factories.
Zhejiang Geely Automotive Co Ltd plans to turn Malaysia into its global hub to manufacture all of its right-hand drive cars, including its premium Volvo brand.
Geely will take a leadership role in production, sales and marketing. Proton will be responsible for distribution of the brand in Malaysia.
These were among the highlights mentioned at the signing ceremony in Putrajaya between DRB-Hicom, the parent company of Proton, and Geely.
Proton and Geely yesterday signed an agreement that would see Geely take a 49.9 per cent stake in Proton. Both parties have not finalised the price Geely would pay for the stake.
Through the partnership, Geely executive vice-president and chief financial officer Daniel Li said Geely would focus on assisting Proton to sell 500,000 cars in Malaysia and around the region by 2020.
He said Geely would be contributing technology, talent and money to Proton. These include platform-sharing that would see the development of Proton's first-ever SUV model from Geely's best selling model - the Boyue.
DRB-Hicom group managing director Datuk Seri Syed Faisal Albar said in the competitive automotive industry, partnership among carmakers globally was common.
A partnership would also further expand Proton's reach to other markets and give it better economies of scale.
"This partnership with Geely will create more jobs in Proton," he told reporters yesterday.
Proton has a workforce of about 10,000 which produces about 100,000 cars a year. In 2016, sales of Proton cars dropped 30 per cent to 72,290 units from 102,174 previously.
The company reported a loss of almost RM1 billion last year.
Proton's Tanjung Malim plant, which is designed to produce a million cars every year, will be made a new manufacturing hub for Geely.
Syed Faisal said Proton would relocate its entire production from Shah Alam to Tanjung Malim within five years.
Despite the entry of a new foreign partner, Proton will maintain its national car status. This means its industrial linkages, including vendors and dealers, will not be affected by the change in shareholding.
Under the heads of agreement signed between DRB-Hicom and Geely, the Chinese carmaker will take a 49.9 per cent equity interest in Proton and also a controlling stake in Lotus, the British sportscar maker, from Proton.
No financial details were disclosed in the sale of a stake in Proton, while for Lotus, Geely would be paying £51 million (S$91.64 million) for a 51 per cent stake in Lotus.
Syed Faisal said DRB-Hicom planned to sign a definitive agreement with Geely in July.
Also present at the signing ceremony was Second Finance Minister Datuk Seri Johari Abdul Ghani, who clarified that with the partnership with Geely in place, Proton would need to repay its RM1.25 billion (S$400 million) soft loan from the Government.
As part of the conditions for the soft loan, Proton was required to collaborate with a well-known strategic partner.
The requirement to collaborate with a well-known strategic partner was imposed on Proton as part of the conditions issued by the Government for its approval of the RM1.25 billion soft loan to Proton, in which a bulk of the money was used to pay its vendors.
Separately, Johari said Proton was entitled to a RM1.1 billion reimbursement from the Government for its RM3.5 billion spent on research and development in the past.
Johari also said there would be no more "subsidy" for Proton from now on, and that the Government would no longer have a golden share in Proton with Geely entering into a partnership with the national carmaker.