Bloomberg News

Mahathir Signals DRB’s Proton May Buy Engine Asset From Petronas

December 06, 2012

Mahathir Mohamad, the former Malaysian prime minister who led the creation of Proton Holdings Bhd. three decades ago, signaled the carmaker plans to buy engine assets from Petroliam Nasional Bhd.

“We are looking and I think we will purchase a Malaysian engine,” Mahathir, an adviser at both Proton and Petronas, said in a Dec. 5 interview in Putrajaya, outside Kuala Lumpur. “Petronas produces a good engine. We are trying it out with our cars and I think they work.”

The move would help Proton, owned by autos-to-property group DRB-Hicom Bhd. (DRB), broaden its range of automobile engines as it faces increased competition from Toyota Motor Corp. (7203) and Honda Motor Co. (7267) in Malaysia. Proton, which controls luxury sports-car maker Lotus, has been losing market share for the past 12 years, said Ahmad Maghfur Usman, an analyst at OSK Holdings Bhd. (OSK) in Kuala Lumpur.

Proton has seen its Malaysian market share dwindle to about 20 percent from about 50 percent in the 1990s,, Ahmad Maghfur said.

Mahathir, who didn’t specify details of the possible purchase, said he meets with Proton management weekly. He isn’t as actively involved with Petronas, Mahathir said.

Petronas, a sponsor of the Mercedes AMG Petronas Formula One team, has developed an engine called EO1 under its technology and engineering division, though the Malaysian state- owned energy firm hasn’t publicly provided updates on the product’s development since 2006, when it said production would begin in 2009. Petronas representatives didn’t respond to an e- mail seeking comment.

Turnaround Plan

Proton previously considered using the Petronas engine in its cars even as the plan didn’t proceed. Both companies signed an agreement in January 2006 to explore the possibility of using the 2-liter EO1 engine technology, Petronas said then.

Proton’s ambitions to increase its range of engines comes as DRB-Hicom, the group controlled by billionaire Syed Mokhtar Al-Bukhary, prepares a plan to boost profit at Proton and turn around its unprofitable Lotus unit. DRB-Hicom said in an e-mail that an announcement will be made soon, without providing further details.

Proton was unprofitable during the first nine months of the year because of losses at Lotus, though it earned pretax profit of 57 million ringgit ($19 million) excluding the luxury car unit, Ahmad Maghfur said.

Proton’s survival as a car manufacturer is crucial for Malaysia to build a highly skilled workforce as the country seeks to earn developed-nation status by the end of this decade, Mahathir said. Mahathir said he’s optimistic.

“The people who are running it are not stupid,” Mahathir said in reference to DRB. “They had made money, turned around companies, they bought over companies. They have been very successful in business.”

To contact the reporters on this story: Chong Pooi Koon in Kuala Lumpur at pchong17@bloomberg.net; Barry Porter in Kuala Lumpur at bporter10@bloomberg.net

To contact the editor responsible for this story: Barry Porter at bporter10@bloomberg.net


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