Geely could steer Proton in right direction, says think-tank

Ideas says if Geely acquires a majority stake in Proton, it could change Proton's mindset and attitude to be willing to take more risks.

PETALING JAYA: If China’s Geely were to take a majority stake in Proton, it may be good for the national carmaker despite concerns over the quality of Chinese cars and the so-called “Chinese invasion”, says a think-tank.

“It is important to realise that being overly sentimental and excessively nationalistic on the issue of Proton will do no good for the national car company,” said Azrul Khalib of the Institute for Democracy and Economic Affairs (Ideas).

Referring to recent reports on Geely Automobile Holdings Ltd leading the race in Proton’s search for a strategic partner, Azrul said the acquisition could be a much needed shot in the arm for the once-dominant Proton Holdings Bhd.

In 2001, Proton, which benefited from decades of government support and bailouts since its inception in 1983, had a market share of 53%. Last year, Proton’s market share stood at 14%.

Over the years, there have been plans for Proton to form a long-term partnership with a foreign carmaker, with potential suitors including Volkswagen and more recently, Suzuki and Renault.

But the recent news that Geely is the frontrunner in securing the 51% stake hasn’t gone down well with some social media users who are concerned over the quality of Chinese automotive brands and of another “sale” to China, in the wake of criticism over the sale of land to Chinese developers.

However, Azrul was positive on the potential boost to Proton with Geely possibly coming in as a strategic partner.

“Geely could inject capital, force reforms and bring about changes to manufacturing processes and, most importantly, change Proton’s mindset and attitude to be willing to take more risks.

“Proton also stands to gain through increased technical capacity and technology transfers which could help it remain relevant and improve its ability to compete in the national and regional markets.”

Geely, which only produced its first car in 1998, has undergone massive changes over the years and even purchased Volvo Cars from Ford in 2010 as well as the London Taxi Company.

According to a report in Carlist.my, Volvo, under Geely has made the largest ever hiring of engineers in recent times, contributing to the development of the new Volvo XC90, S90 and V90 models.

The article also noted that Geely’s flagship model called the Geely GC9 is designed by ex-Volvo designer Peter Horbury.

Azrul said should Geely acquire the 51% stake in Proton, there would be increased pressure for it to deliver products which were competitive in countries which practice free market principles.

“It could be painful and will probably see Geely dragging Proton forward, kicking and screaming, but the national carmaker has the potential to emerge stronger and earn more respect,” he said.

Speculation about Geely being the favourite to tie up with Proton has even impacted positively on Proton’s parent company DRB-Hicom.

Earlier this week, Reuters reported DRB-Hicom’s share price as having gone up by about 10% since last Thursday after local media reported that Geely was the frontrunner for the partnership.

In September, DRB-Hicom said it was looking at five proposals from foreign bidders but declined to name them.

Reuters reported earlier that aside from Geely, Peugeot maker PSA, Japan’s Suzuki Motor Corp and French carmaker Renault SA had also signalled interest in the partnership.

In April last year, the government gave Proton RM1.5 billion in financial aid on the condition that it implements a turnaround plan and finds a foreign partner to assist in research and development. -FMT