Proton better off without Lotus, say investors

The Malaysian Insider (Kuala Lumpur) - Proton should get rid of loss-making unit Lotus Group International Ltd with which it shares few similarities, investors said today.

The national carmaker bought over Lotus in 1996 but has yet to make a profit from the British subsidiary, a situation likely to continue until at least 2014, according to the latest turnaround plan.

RHB Capital analyst Alexander Chia told Bloomberg that Proton was better off without Lotus as there were no synergies between the two carmakers.

HwangDBS Investment Management Bhd equities head Gan Eng Peng also said it "made sense" for Proton to unload Lotus, especially now that the parent company itself was up for sale.

"Proton and Lotus are not a good fit. They are in different market segments, both in terms of geography and product," he told Bloomberg.

Proton’s stock gained 44 per cent on speculation of the sale, which was later confirmed by state investment arm Khazanah Nasional, the owner of a 43 per cent stake in the carmaker.

Khazanah officials have declined to comment on Proton's sale beyond saying it has received proposals of interest.

Gan also said Lotus may need backing from a player bigger than Proton to survive in an industry where carmakers such as Sweden’s Saab Automobile are filing for bankruptcy.

Lotus chief executive Danny Bahar told Bloomberg in an interview last week he is confident he can make the company break even by 2014 — as long as he has the financial backing.

"The only thing we can do is show the current owners, or the new owners, that we are absolutely in line with the business plan that we have presented," the former Ferrari executive said.

"Without the funding support and the guarantees given by the Proton group, we would not survive, end of story."

Bloomberg added that for Proton, whose net profit in the last quarter tumbled 76 per cent on higher spending on Lotus, selling off the unit may allow it to invest in production facilities amid competition from Toyota and Perusahaan Otomobil Kedua Sdn Bhd (Perodua).