Proton has posted it’s third straight quarterly loss, losing RM 281.5 million in the third quarter ending December 31 2006, compared to the previous quarter’s profit of RM 86.5 million. Proton’s nine-month pre-tax loss ended up a huge sum of RM 608.028 million compared with the previous year’s pre-tax loss of RM 72.888 million during the same period.
Revenue for the period fell to RM 3.655 billion from RM 6.012 billion the year before… nearly half! Perhaps this is understandable, as sales towards the end of the year generally dwindles for everyone, as people hold back their automobile purchases for the beginning of the next year so that the car they buy would not devalue instantly as the clock strikes midnight on January 1st. Proton cites poor car sales, higher fuel prices and a one-off cost of RM 27 million to restructure Lotus as the main contributors to this loss.
Proton is due to partner up with a foreign automaker soon, which might be either Volkswagen, Peugeot or GM, however analysts say it might take at least eight quarters – or two full years for the business to turn around. Second Finance Minister Tan Sri Nor Mohamed Yakcop says the partnership will be announced before the end of March 2007. Business Times reported that Khazanah Nasional officials met up with top officials of Volkswagen and General Motors early this week.
Apparently, Khazanah was surprised at the comprehensiveness of Volkswagen’s proposal. Initially, it was thought that Volkswagen only wanted a stake in Proton’s manufacturing, but apparently the proposal includes stakes in Proton’s distribution unit (but of course… you should know why!) plus its research and development arm.
For a small shimmering light of hope in the midst of these black clouds, we can have a look at how Volkswagen has managed to turn two ailing European manufacturers around – Seat and Skoda. Seat recently posted a net loss of 226.6 million ringgit in 2006, less than its 288.5 million ringgit loss the previous year – while still a loss, it is an improvement. Note that Seat had a decade of positive results which ended in 2005 which is when the losses began.
Skoda however, has been profitable and 2006 was a year of record sales for Skoda, this is despite market stagnation in Europe. 2006 sales went up 11.7 percent, while production went up 12.6 percent. Correspondingly, sales revenue went up 8.7% to US$9.5 billion (33 billion ringgit), pushing operational profit up 34% to US$ 677.2 million or 2.36 billion ringgit. Amazing huh? Volkswagen took Skoda’s reins in 1991 with an initial stake, and later upped it to full ownership.