Proton Likely To Go To PSA Group, Lotus To Geely

In a rather abrupt turn from its earlier scoop, The Star’s business pullout StarBiz is now reporting that the government-linked DRB-Hicom, the owner of Proton Holdings, will most likely be selling the controlling 51 percent stake in Proton to France’s PSA Group, maker of Peugeot and Citroen vehicles.

Earlier this month, StarBiz quoted unnamed sources familiar with the matter as saying that Chinese car maker Geely is in the lead to form technical tie-ups with Proton, and that the deal limited only for the controlling stake in Proton’s Tanjung Malim plant rather than Proton Holdings as a whole.

Since then, parties of the Malaysian government privy to the deal, represented by second finance minister Datuk Seri Johari Abdul Ghani, have said that the government would not object to a foreign partner taking a controlling stake in Proton Holdings.

The latest report by StarBiz indicated that Geely has no interest in Proton, and that Geely’s focus was on Lotus Cars, the famed but struggling British sports car specialist owned by Proton.

The report also added that the PSA Group is prepared to invest in Proton, including the moving its existing manufacturing operations in Shah Alam to Tanjung Malim, as well as building a new plant there, turning Tanjung Malim into a regional hub of sorts for the French car maker.

It also said that the proposal by PSA Group is the best fit for Proton to grow and expand its operations in the ASEAN region.

The PSA Group currently assembles a wide range of Peugeot models in Malaysia at its local distributor the Naza Group’s plant in Gurun, Kedah. However these are mostly simple assembly work using semi-knocked down kits as opposed to full-scale completely knocked-down kit operations adopted by other brands, which included welding and painting of body parts.

The limited local/regional content in Naza-assembled Peugeot models mean that the cars can't qualify for preferrential tariff rates under the ASEAN Free Trade Agreement (AFTA) when exporting to neighbouring ASEAN countries. If the report by StarBiz is true, the PSA Group will make Proton's Tanjung Malim plant, which still ranks as among the most sophisticated in the region, as its regional manufacturing hub. 

This is not the first time the PSA Group have considered tie-ups with Proton. In September 2006, Proton signed an MoU with the PSA Group, then known as PSA Peugeot Citroen Group. The MoU covered many areas including possible contract assembly of Citroen and Peugeot models at Proton's plant, as well as product development and vendor development, but discussions ended as quickly as it began.

Proton is expected to make an announcement on its technical partner, and possibly a new owner, within the first half of this year.. So far only Geely and PSA Group are known to have submitted their bids to Proton.