Q1: Why are you lobbying for MV Agusta right now after it has been sold?
A1: Here, we are trying to clarify our (me and former Prime Minister Tun Dr Mahathir Mohamad’s) positions because the inference is that we made a bad decision (in the purchase). When we purchased Agusta, people were asking why we bought (in the first place).
Q2: You are saying this to clarify your connections (to the Agusta purchase), not to question Proton’s decision (to sell)?
A2: Proton can do whatever they want. It has nothing to with me anymore. Many people in the market are saying, the papers are (also) saying that Tun Dr Mahathir Mohamad made that decision (to buy), I made that decision (to buy), we were the key people.
Q3: With this, how do you see the future of Proton (after the Agusta sale)?
A3: We can make another press conference on this. Today, we concentrate on this (sale of Agusta). I know all the strategic plans because I wrote them.
Q4: Maybe you want to comment on Mitsubishi (having renewed its partnership with Proton)?
A4: No.
Q5: At that time when you considered purchasing MV Agusta, did you have discussions with Tun (Dr Mahathir)?
A5: It is (about) the pros and cons why (Proton) we need to diversify (and) why we need to (go) downstream.
Q6: Did he share his opinion?
A6: As the advisor, he saw the dangers that Proton was facing and he knew both the parties and all the papers (related to the Agusta purchase) were given to the board.
Q7: His view then; was it worth the risk?
A7: He even went to see MV Agusta.
Q8: I think the process of buying MV Agusta started in 2002, when Tun was still PM?
A8: At that time we did not put in to him yet.
Q9: A motorcycle magazine has described the squabble over the sale of Agusta as not very good.
A9: It is not very good for Malaysia. If you look at Proton’s stock price today, what is it trying to tell you? When I left, they all said ”Oh, it went up to RM9, very good.” During my time it (hovered) between RM7 and RM7.50. Now it’s RM5 something. I think the business world realises this and has make a judgement on this.
Q10: What is your next recourse?
A10: The important thing is we want to clarify (our positions). First ourselves. We have been judged and sort of inferred to as being party to this (transaction) that made the bad decision. Because we asked for the reason (for the sale), because this is of national interest. I think it is very important for the public to know this, the real reason to the process (for the sale). We will see how they (Proton) respond. The public needs to know.
Q11: You showed all the charts of Agusta’s presence worldwide. Was it your thought to use this to sell Proton?
A11: Oh yes. In fact, the Brazil connection (through Agusta) was to try and get the manufacturing of (Proton) there. And the US distribution (channel) was a piggyback (ride) for Proton and Lotus.
Q12: Why did you not make a briefing before the sale of Agusta?
A12: I didn’t know (about the sale). In the context of whether it (the sale) will help or not, the business world itself was surprised at the speed and transparency. Why didn’t (Proton) listen to the shareholders of MV Agusta and its CEO? They were not even allowed (to attend the meeting on the sale). I just want to clear my name. I didn’t know they wanted to sell for I was (already) out of the company.
Q13: Can you comment that shortly, after the sale of Agusta, there was talk in the market that repayment of Agusta’s debts amounting to a large sum was urgently due by November 2005 and if it was not settled, Proton will become liable.
A13: You can always negotiate. The key points of negotiations are whether you are on target. The bank would love to mend (the loan) if you know how to give feedback.
Q14: Agusta probably was not a core asset, maybe because it was not in the car business?
A14: In the context of assets, it is very simple. Are Honda Motorcycles core to Honda, yes or no? Are BMW Motorcycles core to BMW, yes or no? The answer is there, because the core is the process I told you. Honda can make an aeroplane engine. That is core.
Q15: What is the holding stock (unsold stocks) of Proton during your time? Early last year?
A15: I don’t have the figures, I need to check them. Basically, I have warned the board that we were too involved in meetings, which were about 10 meetings in a month. We don’t know what was happening in the market place.
Q16: What about Proton’s holding stocks currently?
A16: I was informed that 30,000 over units, of which 18,000-19,000 were from 2005. It is a whole lot of money, you calculate.
Q17: What is the Lotus profit right now that Proton had bought it? Is it profitable?
A17: I don’t have the latest figures. I think they either break even or are making money now. Their whole programme has to double that volume, that’s when the money comes in. So, that’s why all the engineering has been going on for the last two over years. Their new product is coming out.
Q18: But you do really know if Lotus broke even?
A18: I don’t have (the figures). You need to check with them.
Looking to sell your car? Sell it with Carro.
He is trying to clear his name, but actually he is looking more of a bad guy to me.
Bullshit only lah .. Initial D u are right.
It is a bit clearer now….
The new management of Proton knows nut bout what there are doing?
Proton is turning from bad to worse.
What interest me more is I want it to be closed down!
Rakyat doesnt want a national, only wanted affordable quality safe car!
Wahlaueh…
Time will proves who is right or wrong. Just 'org besar' playing games infront of public. Like Xoomie said, we only want a quality safe car… plus cheap in price!!!…
How could a CEO not knowing the level of stock in hand during his time??? I find this very unacceptable….. unsold stock can cost millions of Ringgit!!!
After reading the the Q&A, some how it gives me a feeling that he really fail as being a CEO but some may say that he builds the R&D team and bla bla bla. For me, CEO is responsible for the overall operations of the company and not R&D only. certain figures like stocks, level of cash, sales are important to manage by heart!
proton has PROTON EDAR. their CEO/COO will know the correct figure. CEO should know everything, but not always. He is a car fanatic, which is good.. but business wise, it is a different matter. But in the sale of MV, i am incline to be in his side..
Seriously, those of you who says a CEO should know certain facts like the back of their hands should step back and ask yourselves, how many of us even remember our gf/wife's hp/office phone number by heart? Personnaly, I have to scroll though my phonebook
Plus, an experienced public figure/speaker shud nvr spout out figures if they are unsure, TM surely knows the ballpark numbers, he just doesn't want to "agak-agak" things like that.
This from a person who DOESN"T like the guy.
I do agree if your argument on not to remember/know anything refers to an individual or a single person capacity, but to say this to a Chief Executive Officer, who manage many executives, this would be a lame excuse.
Don’t they have a progress report for him to supervised or manage periodically? Or at least the sales or stock department should send him their reports on sales or stocks. Not that CEO need to do/know everything but he has somebody in dispose to do/know it for him, and they all are for him to manage, right.
And to make things more weirdo, after not being a CEO, now only he knows the unsold stocks figures and even told it to the press.
IMHO, why that i'm saying unsold stocks is important because the value is huge. if according to TM, the unsold stocks for 2005 is about 18,000 units and say, the costs is average RM30,000 per unit, then the value of the unsold units is RM540 million!!! compare that to buying MV Augusta of only Euro 70 million (about RM300 million).
Now I know why TM said he made the right decision because, Euro 70 million is cheap as he don't even bother to remember the RM540 million of unsold stocks sitting at the back yard. But having said that, I do support TM pushing for transparency!!!
all of this incident look more like a planned acting in front of the public. Actually IMO, the 2 TMs have got a point too like some ppl think, but proton's shut up for those 2 to bash them is also my favourite bcoz shut up doesn't mean they admit.
So, to be frank, i am more to the proton side bcoz the management is new, i want to give them time to prove what they are doing…………….and also bcoz those 2 TMs are no longer in control of the company but still talks to the public and the media like a boss slaming proton, to me, those 2 r like ushering the public to push proton too, which i dun like.
just wait and see !
hi, Xoomie posted this in autoworld…
i love this quote "As a closing statement, he stated that both he and Tun Dr Mahathir wish
to register their interest to buy Lotus for one British pound, or more
than one pound, if and when it is for sale. Their rationale is that a
precedent has been set (through the sale of Agusta for one euro)."
read on….
Former Proton CEO Tengku Tan Sri Mahaleel Ariff today spoke out in
defence of the purchase of MV Agusta, which was carried out when he was
CEO of the company, as well as questioned the sale of the Italian
motorcycle manufacturer. He explained at a press conference this morning
that the purpose of his action was two-fold: firstly, because Proton’s
board had decided not to respond to questions earlier posed [concerning
the Agusta sale for one euro] by Tun Dr Mahathir, who is Proton’s
advisor, and by himself and secondly, to respond to allegations that his
decision to purchase Agusta was a bad one which had put Proton at risk.
"By not replying in itself is a transparency of falsehood contrary to the
wishes of the Government and transparent for all to see," he said,
referring to the issues that had been raised earlier, namely the process
of the sale of Agusta, that the sale had been part of its divestment of
non-core assets, and that Proton’s current losses are being attributed to
losses of Agusta. Tengku Mahaleel said that his statements at the press
conference today were also shared by Tun Mahathir who was unable to
attend as he was overseas. In continuing to seek answers from Proton,
Tengku Mahaleel explained that it was a matter of public interest since
Proton is a national company and ‘for the sake of good ethical
practices’.
By his calculation, the sale of Agusta for just one euro had lost Proton
69.999 million euros plus fees to consultants and Italian court
administrators which added another 6 million euros for a total loss of
75.99 million (RM340 million). “For this money, 11,000 Malaysian
fisherman could each have been given a boat,†he said.
The former CEO then went on to provide an insight into Proton’s internal
management processes and control systems and questioned if the processes
were followed prior to selling off Agusta. He also wanted to know the
positions taken by certain board members who had earlier approved the
purchase of the Italian company, and why they had seen reasons to sell it
off.
Recalling that it took some 14 months to deliberate on the purchase of
Agusta, Tengku Mahaleel expressed surprise that selling it off took just
two months to decide. According to him, the 14-month period began in
December 2002 when Agusta was identified for acquisition. When asked if
Tun Dr Mahathir had, at that time, been briefed on the intention to make
the acquisition and whether he was positive about it, Tengku Mahaleel
said he had been told all the pros and cons and the risks and had been
agreeable as well.
Tengku Mahaleel also questioned the declaration by Proton’s board that
Agusta was a ‘non-core business’, hence the need to sell it off. In his
view, Agusta should not be seen as a mere ‘motorcycle company’ but as an
automotive company which has the full scope of activities of any
automotive manufacturer. Therefore, in selling off Agusta, he sees it as
having sold off a core asset of Proton.
On why he had supported the decision to buy Agusta (and obviously still
supports it), he said that it was ‘a strategic acquisition to ensure
Proton’s future’ particularly as that future seems uncertain with auto
policies that are inconsistent and sometimes not transparent.
“With the changing Malaysian auto policy, Proton’s future cashflows will
not be sustainable as its domestic market share falls below 30%. Shocking
as it may be, Proton’s Q2 operating profit is a negative (-RM7 million)
well before the forecast of 2008 of severe competition,†he said. “So it
is even more urgent that it has to find ways of gaining new profits to
maintain its level of operations and R&D investment. This means the
combination of Lotus and MV Agusta is crucial for Proton.â€
He said that the combined income – from 2008 – would be able to fund
Proton’s need of RM500 million annually to maintain its level of
investments for new products and market expansion and that around half of
that had been forecast to be contributed by Lotus and Agusta.
"Of course, this also depends on Proton’s management skills to turn
around and introduce new products quickly," he added.
To support his forecast that Agusta could actually become a profit centre
for Proton, he revealed the 2006 earnings forecast prepared by Price
Waterhouse Coopers, an independent accounting firm, which was said to be
a ‘conservative’ one. In the forecast (before tax), Agusta could be
making RM73 million this year (best case) and even in the worst case,
RM31 million. The forecast for 2010 was RM228 million.
The key technologies which Agusta already has have been presented as one
of the important reasons for acquiring it and he again emphasised them
with more elaboration than before. Being a motorcycle manufacturer,
Agusta has the expertise to make small yet powerful high-tech engines and
could develop 850 cc and 1000 cc engines for Proton models at 50% what it
would cost Proton/Lotus to develop. Such engines would be RM2,500 cheaper
than the engine currently used in the Savvy, and on a production run of
250,000 Savvys over 5 years, it would thus be possible to lower
production costs by RM625 million. This figure, he pointed out, more than
paid for the 70 million euros which Proton had paid to buy over Agusta.
Tengku Mahaleel also revealed that Agusta had a concept for a RM10,000
car using unique manufacturing methods and also had a patented airflow
system which was going to be used for the Campro engines. The Italian
company also has a very unique gearbox which would be valuable to Proton.
Returning to the financial issues, he revealed the purchase conditions
which were agreed upon when Proton bought over Agusta (or more
accurately, acquired the MV Group through a share injection of 70 million
euros). The conditions related to the settlement of Agusta’s debts with
specific terms over a 4-year period, and he claimed that even prior to
purchase, Proton had managed to reduce the debt level to 68 million
euros.
Crucial to the survival of Agusta, which was on the brink of bankruptcy,
was getting working capital and to address this quickly, it was decided
that the unused credit line of 9 million euros available through Proton
UK would be utilised. Also, group purchasing of Japanese parts worth 12
million euros was carried out, optimizing buying power.
Having made a case for a turn-around strategy, Tengku Mahaleel said that
it made no financial sense to sell off the company for one euro and
that ‘the Proton board’s action and intention is difficult to
comprehend’. He revealed that the CEO and CFO of Agusta had attempted to
discuss the matter with Proton’s board but had difficulty doing so and
more puzzling was why the Proton board had chosen to cut off Agusta
(financially) when financial advisors had recommended financial support
to continue at least for the 2005/2006 annual management plan and then
decide what further course of action should be taken.
When asked to comment on the statement by an analyst that Agusta's
creditor banks were on the verge of foreclosing and if that had happened,
Italian law would have held Proton responsible for all Agusta’s
contingent liabilities, he replied: “You can always negotiate [on debt
repayment]. The key point on negotiation is whether you are on target.
Banks would love to lend money to you when they know you have a backer,
but when the backer pulls out, the banks pull out.â€
The final part of his presentation aimed to show that Proton’s losses in
Q1/Q2 of its financial year (not the calendar year) are not wholly due to
Agusta – and also nothing to do with him since he had already departed
from Proton. He noted that Proton’s reports of loss during the two
quarters were due to provisions of RM137 million and RM161 million,
respectively, and drew attention to the fact that the provision for
Agusta was only RM45 million in the first quarter. In other words,
Proton’s losses could not be blamed entirely on the Agusta issue.
An interesting fact he produced was that unsold stocks at the end of
October 2005 were 25,000 units which, if valued at RM40,000 each,
amounted to RM900 million. While he said he could not recall what the
stock position was at the beginning of 2005, he did say that he had
understood that there were at least 30,000 units of unsold stocks now and
lamented that 18,000 units of those were 2005 models which would likely
have to be sold at a discount since they are old models.
In wrapping up his presentation, he provided an overview of the
management performance ‘before and after’ which were very interesting:
GROWTH BETWEEN 1996 ~ 2004
Turnover : from RM5 billion to RM12 billion
Assets: from RM1.7 billion to RM5.6 billion
Cash/equivalents: from RM450 million to RM2.6 billion
Profits: no losses reported
EXPENDITURES (INTERNALLY FUNDED)
Waja development : RM817 million
Gen2 development: RM500 million
SRM development: RM445 million
Savvy development: RM467 million
ACQUISITIONS
USPD (which became Proton Edar) : RM384 million
Proton Commerce: RM125 million
Lotus: RM503 million
MV Agusta: RM364 million
Tg Malim plant project: RM1.8 billion
Given the strategy that he and his team had formulated, which included
the anticipated revenues from Lotus and Agusta – from 2008 – Tengku
Mahaleel said that Proton would have been able to fully repay its
government loan of RM800 million (which was given when Proton began
business) by 2007. However, in view of what has taken place since the new
management took over, he believes that ‘the sale of Agusta has placed
risk on the company’s future, reduced its ability to increase engineering
capability and also reduced its access to new markets through the Agusta
network and products’.
As a closing statement, he stated that both he and Tun Dr Mahathir wish
to register their interest to buy Lotus for one British pound, or more
than one pound, if and when it is for sale. Their rationale is that a
precedent has been set (through the sale of Agusta for one euro).
Tengku Mahaleel certainly had the right to speak up on the history and
process by which the decision was made to acquire Agusta since it was
done when he was CEO. Understandably, he is disturbed that public opinion
has been influenced by various commentaries that his decision was a bad
one, thus putting his performance as CEO in a negative light. However,
his situation is no different from that of Carly Fiorina (former CEO of
HP), Jurgen Schrempp (former CEO of DaimlerChrysler), Bernd
Pischetsrieder (former CEO of BMW) and Jac Nasser (former President of
Ford Motor Company), all of whom were forced to depart from their
respective companies under controversial circumstances. These CEOs had
all been ‘bright stars’ and seemed to do no wrong, were given a free hand
to buy up other companies and spent billions to execute what they
believed to be sound business plans. Like Tengku Mahaleel, they too
defended all they had done as being ‘the best strategy’ for their
companies; surely none of them would admit that he or she had made a bad
decision?
It is also reasonable to question the motives of Proton’s board in
selling off Agusta but then again, seeing that the company’s profits and
market share were declining, they had to act and in their mind, Agusta
may have been a burden the company could do without. They may have a
different perception of the value of Agusta and the route Proton needs to
take to survive. Can anyone be so certain that his strategy is The Right
One? Only time will tell whose move was the right one because predicting
the future with certainty is a skill which humans do not have.