Proton to loose management control to a foreign firm?

I’m appalled to see that the Govt. may finally give management control of Proton to a foreign company.

My points:-

* You don’t need to have a 51% stake to gain management control of a public-listed company. Just to highlight the distinction between management-control and majority–control.

* Whilst the latter automatically leads you to gaining management control through your board representation (if you so desire), the former means that you can gain management control after obtaining approval from other shareholders only if their stakes after combining with yours, makes up to more than 50% of the said company.

* Sometimes stake as low as 20% could lead you to gain management control, by virtue of you emerging as the single largest shareholder and with approval from other key shareholders. The only difference is how much share of future profits (as well as liabilities) that you get. Also if there’s room for other shareholders to collectively veto certain management decisions that you make through their board representations.

* Whilst there could be potential synergies and benefits arising from a tie-up with a reputable foreign partner like VW, this doesn’t necessary mean that the Govt through its various investment companies like Khazanah should cede management control of Proton to a foreign company. It’s like taking an easy way-out to me. Can’t the Govt. just allow them to have board representation to reflect the 40% shareholding instead of giving management control? Our locals not up for the job?

* By the way, is this 40% sell-off necessary in the first place?

* Even though the Govt’s strategy is to set-up a new company to house those key business units for this partnership with VW, I don’t see this as different as ceding management control of Proton. If you strip Proton of those key business units, what would Proton be left then that is of value?

* I could even go further by arguing that such tie-ups for those synergies to potentially materialize may not necessarily mean that a foreign partner must end up having a direct stake in Proton or this new company. Why hurry into a “marriage” if you can get similar benefits with less obligations. (pls don’t turn this into a religious issue lah…)

* It could just be a collaboration in specific areas or target markets, setting up subsidiaries, on R&D etc as a start. What puzzles me is why would the Govt. want to sell-off a company such as Proton that has remained profitable for some time and has a huge cash pile? Other options like I briefly mentioned above could be explored to begin with.

* Can the Govt. give a guarantee that selling-off part of Proton is the only way to arrest its decline in market share and improve profitability? When can we start seeing those gains? By what percent?

* Is the objective of the Govt. in Proton only to improve profitability by increasing market share and improving efficiency? What about other objectives?

* I believe the Govt. must be able to prioritise it’s objectives well. If the main objective is 100% profitability/efficiency for Proton, then why not just take the easy way out to house Proton’s manufacturing plants in Indonesia or China, or simply buy its components 100% from China. Then we all can have cheaper cars. But in the process, we will kill-off over 100,000 jobs, thus defeating other Govt’s objectives like creating employment, improving local content, creating entrepreneurs etc. Just
citing an example.

* It’s a tough balancing act for the Govt. indeed. But before we can understand the rationale for this “sell-off” of Proton, we need to first understand what is the main priority (or order of priorities) now for Proton from the Govt’s perspective?

* Does the Govt. (especially the PM) have a view at all on this matter? Or take the easy way-out to delegate to agencies like Khazanah to think and make the decisions. Is Khazanah looking at this only from their perspective (say improving returns) or isit wearing the hat of the Govt. & doing the balancing act?

* It’s not surprising for me to see the spin-doctors been busily portraying Proton as a company that has been steadily losing its market share, made loses last quarter etc to justify this sell-off.

Maybe Mahathir has seen this “sell-off” of Proton coming for some time.

When asked to comment on MAS intentions to hire a foreigner as it’s CEO a few months ago, I was completely stunned by his sarcastic reply which was aired on primetime TV3 news. He said something like “You can even hire a foreigner to be the Prime Minister. As long as he has brains!”

What is he trying to tell us?