Proton gets flak over Harley’s buy of MV Agusta for RM360m

Proton gets flak over Harley’s buy of MV Agusta for RM360m

Former Proton chief Tengku Mahaleel. - Bernama pic

(Malaysian Insider) KUALA LUMPUR, July 15 — American motorcycle giant Harley-Davidson has, according to the Associated Press, agreed to buy MV Agusta for US$109 million (RM360 million), in sharp contrast to the one euro Italian company Gevi paid when it bought the Italian bike-maker from Proton Holdings in 2006.

Harley-Davidson said in a statement out of Milwaukee last Friday that it was likely to seal the deal in weeks but the news is likely to unleash a firestorm of criticism against Proton, which was savagely assailed for the 2006 sale by no less a person than former Prime Minister Tun Dr Mahathir Mohamad, who conceived Proton back in 1984, according to the Singapore Business Times.

Proton, then under the leadership of Dr Mahathir protege Tengku Mahaleel Ariff, bought a 57.75 per cent interest in MV Agusta in December 2004 for 70 million euros (RM357 million). Dr Mahathir had stepped down as premier a month earlier but had been appointed Proton adviser by his successor Datuk Seri Abdullah Ahmad Badawi at the time.

By 2005, Proton was floundering amid intense competition from better-quality Japanese models and relations between Tengku Mahaleel and the new Proton board, all appointed by Abdullah, were tense. These culminated in the chief executive's contract not being renewed. Barely a year later, the company sold MV Agusta, with its debt of 107 million euros, for one euro.

Dr Mahathir took it personally, asking for an investigation of the sale decision and its beneficiaries, and questioning the urgency of the deal.

Proton defended itself by saying there were “no operational, engineering or technological synergies” between the two companies, a conclusion that it said had “been independently confirmed by its appointed advisers”.

When Tengku Mahaleel and Dr Mahathir decided on the buy earlier, it was precisely because of the deal's so-called “technological synergies”.

Even so, the Harley deal would appear to vindicate both men and is likely to rebound upon Proton and, by extension, Abdullah and his administration, which has stoutly defended Proton's new management against the criticism of Dr Mahathir.

MV Agusta makes a line of premium sports motorcycles under its own name and another line of lightweight bikes under the Cagiva brand.

Meanwhile, the deal will help Harley-Davidson expand into the European market as sales slump in the US where consumers are pulling back on spending. Performance biking accounts for almost 80 per cent of sales in Europe, where Harley's sales have been growing in double digits over the past three years. The US bike-maker now has a 10 per cent share of the European market.

Meanwhile Bernama reports that Deputy Finance Minister Datuk Ahmad Husni Hanadzlah told the Dewan Rakyat today that the sale of MV Agusta for one euro was profitable to Proton as there was no synergy between the Italian motorcycle maker and Proton as a car manufacturer.

He said Proton made the decision after taking into account the financial liabilities of Agusta which had debts of 107 million euros.

Under the agreement, the shareholder must be responsible for the company's debts, he said.

"As there was no synergy between car and motorcycle and instead of shouldering the debt, Proton decided to sell Agusta,” he said in reply to a supplementary question from Nga Kor Ming (DAP-Taiping) during Question Time.