As most of you know, Proton had disposed of MV Agusta last December for 1 Euro in an exercise to divest its non-core assets. Proton had originally acquire MV Agusta for 70 million Euros, on top of taking on its debts. It finally sold it to Gevi SpA for 1 Euro, together with its debts and working capital requirements of 139.44 million Euros.

Tun Dr. Mahathir and Tengku Mahaleel issued a public release questioning Protons sale of MV Agusta, calling for Protons board to answer some questions like who else bidded for MV Agusta, why it was sold for only 1 Euro, who made the decision to sell, was there any attempt to get a higher price, and many more which can be found in this previous post.

Originally Protons management had drafted a response to the TM duos queries, but in the end Protons board only issued a brief statement to Bursa Malaysia and decided not to do any additional explanation on the matter. To Protons board, the Bursa Malaysia statement had already addressed the necessary details which need to be made known. The TM duos queries were left unanswered.

The decision to buy MV Agusta took 14 months to make, while the decision to sell it off took 2 months. This insinuated that Tengku Mahaleel and Tun Dr. Mahathir had made a very bad business decision in purchasing it.

Basically the above two issues are the cause of dissatisfaction – the way the sale was made, and treating MV Agusta as a non-core asset. With no answer from Proton.

Surely you do not expect Tun Dr. Mahathir and Tengku Mahaleel to keep quiet about this? The recent Tengku Mahaleel case against Proton with the Jabatan Perhubungan Perusahaan is a totally different matter altogether. That is regarding his allegedly shady termination, not MV Agusta.

The latest salvo was fired on Monday by Tengku Mahaleel and Tun. Dr Mahathir. Tengku Mahaleel commented on the lack of transparency which is against the governments wishes for transparency.

For one, he disagrees that MV Agusta is considered a non-core business. According to Tengku Mahaleel, the automotive industry consists of assembling and logistics, casting and machining engines and related parts, mould and dies making, styling clay and design engineering, stimulation and prototype building, vehicle testing, distribution and dealership.

Why keep MV Agusta? According to the TM duo, MV Agusta had a concept plan to build a car which cost only RM10,000 using frame and unique manufacturing methods which could have been the base for a budget peoples car like an Iswara replacement model. MV Agusta also could build a small high-tech 850cc-1000cc engine for small Proton cars like the Proton Savvy. The engine could potentially cost RM2500 less than the 1.2 litre Renault unit. This could save Proton RM625 million for 250,000 Savvys sold over 5 years, making up for the 70 million Euro it costed to purchase MV Agusta. MV Agusta also has an unique patented airflow system which could be integrated with the Campro engine.

Tun Dr. Mahathir expressed his disappointment with the Securities Commission for keeping mum over the issue of a listed companys controversial sale of an entity for such a small amount. “In the world of motorcycles, this is the Rolls-Royce, and you give it away for one Euro. And what are you going to do with that one Euro?” Well Tun Mahathir, perhaps Proton can go buy another company on the verge of bankruptcy ;)

Tengku Mahaleel had a medium to long term financial plan for Proton of which MV Agusta had a part to play in it. According to projections and if the plan went well, MV Agusta should be on its way to turning a profit by the year 2010 and will provide RM200 million a year revenue for Proton which can be used to fund development efforts. Development costs are about RM500 million a year.

Tengku Mahaleel also pointed out that Protons financial loss posting in Q1 2005 was not entirely due to MV Agusta. Protons share of liabilities for MV Agusta was only RM64 million, which was 57.5% of the total RM 111 million reflecting the 57.5% ownership that Proton had in MV Agusta. MV Agustas losses for the quarter was RM48.3 million. So 57.5% of that is RM28 million. Protons losses for the quarter was RM166 million. Basic mathematics would tell you RM28 million is only a fraction of RM166 million.

Provision for MV Agustas debts was only 45 million, while total provisions were 137 million. Rumours are that the extra 92 million ringgit are from extra stock pushed onto Proton dealers that are unsold though this rumours are not confirmed. However, apparently the high inventory is normal and not a cause for concern, Proton Edar CEO Datuk Maruan Said commented on reports that there were 24000 unsold Proton cars in inventory left over from 2005, worth about RM 900 million.

A complete Q&A session with Tengku Mahaleel on the issue is available here.

I apologize for the delay in posting on this latest updates on Proton as I have been busy moving my blog to a new web hosting provider today. The move is now complete and I trust that all of you have no problems visiting my blog now. If you have problems with any of the functions like commenting or browsing, please contact me as soon as possible and Ill try to identify the problem and rectify it.