MV Agusta sale

Categories: Malaysia

Finally the reasons involving the sale of MV Agusta has surfaced. In 2004, Proton, under its former CEO, Tan Sri Tengku Mahaleel Tengku Ariff, it acquired 57.57 percent stake in Agusta for 70 million Euro (RM315 million), through its wholly-owned subsidiary Proton Capital Sdn Bhd. During its stake with the company, it further pumped in more money. This further pushed up the loss to RM510.24 million as stated in Proton's annual report for 2005. In December 2005, the entire stake was sold to GEVI SpA, a special purpose vehicle for a nominal sum of one Euro.

This has prompted former PM Tun Dr Mahathir, Proton's advisor to question the sale for just one Euro. Together with Mahaleel, they posed 8 questions to the current management of Proton. This was in January 2006.

However, the present management only started to reveal the decision on the sale in March 2006. In it, it claimed that the board of Proton was not aware of all the facts when it invested in Agusta. All these were only found out in August 2005 when a representative in Agusta asked for more money. The current chairman Datuk Azlan Hashim said of the terms of purchase:

- RM176 million cash advances were needed to keep Agusta afloat
- Proton could not exercise control despite the 57% stake in Agusta and could not change the management
- minority shareholders in Agusta could veto key decisions
- Proton could not increase its stake even if fresh capital was pumped into Agusta

Too many questions surfaced when this report was published by the New Straits Times on March 29.

Firstly what was the rationale for buying into a company on the brink of bankruptcy? Does Proton intended to branch into the motorcycle business? Or is it confident that its management can turn Agusta around and make a profit in the long term? Or, as we know now, this was based on an engineering knowledge that Proton can learn to further improve on its engineering technology, as Dr Mahathir had countered.

Who brought up the idea in the first place. Was the idea mooted as a reaction to the falling shares prices of Proton, hoping to create some positive news to bolster the share values? If this is so, can a falling profit support a near-bankrupt company and for how long?

Who were the people involved in negotiating the terms of purchase? Do they know that they will be getting "the short end of the stick" with the purchase? If they know, why did they proceed with the purchase? If not, why was it overlooked? It is indeed strange that only after half a year of the purchase, the Proton management found out about the terms of the purchase. Shouldn't the people involve in the purchase have gone through the terms properly and thoroughly. If a thorough study had been done and Proton still goes ahead with the purchase, what is the rationale then? I am not a business person, but I understand that one of the reason to have a majority stake is so that one can control and steer a company. What is the point of holding majority stake when it does not come with executive power? Worse, the stake remains despite of pouring in of more capitals! Surely somebody must be answerable for this!

Was the Proton management informed about or had tried to find out the terms of purchase? According to Proton chairman Datuk Azlan Hashim, "the board of Proton Holdings Bhd was not aware of all the facts when it invested in Agusta." Is this an excuse or is this an honest revelations? Shouldn't the people in charge of the purchase find out all the facts, actively or otherwise, so that the Board can be properly briefed? Was the Board ever being briefed at all before giving the go ahead? Questions and more questions!!

How was the raw deal found out and who found out the truth? Datuk Azlan said: "We were first alerted when our Agusta representative asked for money. Clearly, we were caught by surprise." Yes! Malaysians are even more surprise that such a major company, the pride of Malaysia's automotive industry, with exports to several countries in the world were caught unaware when they signed off a RM176 million deal! We are talking about RM176 million and not just one or two million ringgit which to such large company is small change. The price tag alone will open the eyes wider on what was on offer!

What had Proton management done after the true picture was found out? Was internal auditing carried out? Was any personnel reprimanded or even sacked? I believe some form of auditing must have been done. This is because a new management was announced in November 2005.It would be of public interest if the findings can be announced.

On the sale of Agusta, who decided that it should be put up for sale and the rationale? Had the reasons for the purchase changed so much that Agusta becomes redundant? If this is so why had it change so much over the short span of 1 year? Was this poor planning or something unforeseen? Has new circumstances prevented the holding on of the company? Proton had announced liability in Agusta which has further increase losses. And to stem out further losses, it had to be sold. If this is so, why was a decision made to buy it just over a year ago?

How was the sale publised? Was it put up for bidding? How did the sum of 1 Euro comes about? Was there negotiations to improve on the sale price? There are just too many questions!

Bernama News agency reported on April 1st, that Dr Mahathir had said the purchase of Agusta was a good investment. This was based on the engineering know-how that Proton could learn. He drew a parallel with Honda which started as a motorcycle company now produce some of the best cars in the world. But in the quest for new engineering know-how is it justifiable to agree to such poor purchase terms?

Now as we are getting a clearer picture, what next? Will we eventually get the whole true picture? Will PM Datuk Seri Abdullah Badawi be true to his words when he call for more transparency? I think Malaysians are not interested in scapegoat because we know the real culprit will somehow escape the clutches of the law. Even when they are charged, the court case will drag on for years until the case is forgotten. Finally, as is usually the case, the government lacks accountabililty. There is always the yearning to do right but as always lacks the political will to carry out the necessary. So will we ever know the truth?