'Options open' on sale of Lotus

Malaysian conglomerate DRB-Hicom Berhad says it is keeping its options open about selling loss-making British sports car maker Lotus after buying its parent company Proton.

DRB-Hicom, which distributes and assembles Volkswagen, Mercedes-Benz and Honda, also says it is in talks with its foreign partners on possible tie-ups to revive the national car maker but ruled out selling a stake in Proton.

Managing director Mohamad Khamil Jamil said today DRB-Hicom would conduct due diligence on Lotus before making a decision.

Proton bought Lotus in 1996 to bolster its technological know-how, but losses at Lotus have weighed on the company.

DRB-Hicom announced on Monday a £625m deal to take over Proton, in a new chapter for the struggling car maker.

"It has been there for years and has done some good things,'' Mr Mohamad Khamil said. ``We need to sit down with Lotus management and look at their plans before arriving at a definitive decision.''

Analysts said DRB-Hicom’s deal to take over Proton would boost the car maker, but losses at Lotus would require a hefty cash injection that could hamper a turnaround.

Proton last year said it hoped to revive Lotus in five years as a premium sports car maker comparable to Ferrari and Lamborghini.

It also said it would jointly develop a sports city car with Lotus for the global market. Last year, Proton entered Formula One racing as the chief sponsor for Renault to help Lotus strengthen its hand in the luxury market.

“Lotus is still relevant in the longer-term picture for Proton. There is strong demand in China for Lotus cars but Proton has to tone down on capital expenditure for Lotus,” said Ahmad Maghfur, analyst with OSK Research.

Mr Mohamad Khamil said he would meet Proton’s management soon to discuss growth plans including restructuring the vendor supply chain, reviving Proton’s brand name and ramping up exports, especially to south-east Asian markets.

He said DRB-Hicom was in exploratory talks with its foreign partners about possible tie-ups that could help Proton tap the global market, but this would not involve any equity sale.

“Our long-term plan is to ensure Proton remains a heritage, a national car company but we have to fortify the brand,” he said.

“There will be alliances, collaborations and joint ventures with our foreign strategic partners to create a platform for Proton to venture into the global arena.”

Once the king of the road, Proton’s fortunes have dwindled, with its market share falling to around 30%, from more than two-thirds just over five years ago due to greater competition as Malaysia liberalised its auto market.

Proton has failed in recent years to seal tie-ups with foreign car makers, including Volkswagen, due to the government’s insistence on maintaining control over the car maker. DRB-Hicom, controlled by billionaire tycoon Syed Mokhtar Al-Bukhary, is also involved in banking, services and property sectors.