Don't let Proton slow down, it's a highway
If you are feeling a sense of deja vu, I don't blame you. The takeover speculation of national carmaker Proton Holdings Bhd, once the rage in 2006-2007, has resurfaced in the stock market.
The potential buyers of Proton, 43 per cent held by Khazanah Nasional Bhd, are the usual suspects. The list includes Naza Group, Tan Sri Syed Mokhtar AlBukhary's DRB-HICOM Bhd and little-known Yasmin Holdings.
The stock is now up 49 per cent for the past one month, doing much better than the broader market's 4 per cent gain in the same period.
So far, Proton's dealers have come out in the open to say the speculation must stop. The carmaker's suppliers are also privately saying the same thing.
And they are right.
Businesses don't work well when there is uncertainty and currently, the speculation has created just that.
For example, parts suppliers must invest in the machines first in anticipation of winning orders from manufacturers. If they think that the manufacturer may have a change of plans because a new owner will come in, they will delay that investment.
Proton suppliers have gone through tough times under the carmaker's previous management and some are still feeling the pain of it.
Tracoma Holdings Bhd, once a top parts vendor, had partnered Proton no less to set up an assembly plant in Indonesia. As the plan didn't quite take off, it was saddled with too much debt and had to sell its stake in the factory to Proton.
Some, like Delloyd Ventures Bhd, even diversified into plantations to protect themselves against the wild swings of the automotive industry.
Proton has more than 200 vendors, essentially the backbone of the motor vehicle industry. They worry that a new owner might not know the industry well enough and history might repeat itself.
One example was how previously Proton did not share its future plans with suppliers. This left the parts makers in the dark and they couldn't plan ahead.
There is also concern that a new shareholder might be more interested in making a quick buck from the choice asset of Proton, which is the land in Shah Alam where its headquarters now sits.
That freehold land, measuring 6,231,080 sq ft, is valued at RM68 million on Proton's books and it has never been revalued since 1983.
It is probably worth 10 times more right now as it sits right next to a highway, making it a prime property.
What Proton needs, and this has been widely reported, is a technical foreign partner. This means the partner doesn't need to hold Proton shares, but it can probably have an interest in Proton's manufacturing arm.
Proton needs help with new models and to expand abroad.
The new management has done a lot of work to put Proton on a stronger footing. The Exora multi-purpose vehicle is a step in the right direction and it needs to take bigger steps from now on.
What it doesn't need, and I've said this before in 2006, is distraction.