PricewaterhouseCoopers Report on Mismanagement of Proton Holdings should be tabled  without censorship  together with government response in Parliament allowing for full parliamentary debate on August 21

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Media Statement
by Lim Kit Siang  
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(Parliament, Wednesday) The PricewaterhouseCooper Report(PwC) on Mismanagement of Proton Holdings  for the past 10 years from 1996-2005, which was the scoop of The Edge magazine on Saturday, should be tabled without censorship, together with government response, in Parliament allowing for full parliamentary debate on August 21 when MPs reconvene for the long budget meeting.

As stated by The Edge exclusive report entitled, �Proton�s CAN OF WORMS�, PwC report gave a litany of mismanagement running into billions of ringgit � with some controversial projects implemented without proper consultation or consent, billions in expenditure spent without indepth discussion, while the board was not even aware of legal problems.

The instances of poor corporate governance in Proton, when major policy matters were decided by the Proton�s management or by the boards of the various subsidiaries and not brought up to the board or it was notified late, include:

• The deal to buy UK-based car maker Lotus, acquiring a 63.7% stake in Lotus  Group International Ltd (LGIL), was signed on October 16, 1996. It was only presented to Proton board a month later, on November 27, 1996.
• Not clear if budget of Tanjung Malim plant was tabled to board for approval between 1996 to 1998.
• Board not informed of material legal cases. Example is a claim by Proton Automobile Deutschland for RM162 million. A RM34.4 million settlement was reached by former CEO of Proton without informing the Board.
• Proton tied up with Tracoma Holdings Bhd to assemble cars in Indonesia. Proton financed Tracoma�s 49 per cent investment in the venture. Proton�s board was asked to ratify the financing agreement after the loan was drawn down.  Currently, there is no legal agreement for the loan and the recoverability of the financing (about RM1.4 million) is still uncertain.
• Report suggests that management misrepresented potential  of Italian motorcycle-maker MV Agusta, saying it would generate positive cashflow from 2004 onwards. But Agusta had needed almost RM90 million in financing in 2004.
• Report states that from April 1, 2002 to July 31, 2005, Proton�s plants in Shah Alam and Tanjung Malim experienced a total of 41,965 minutes of shutdown caused by vendors. The vendor responsible is required to pay RM3,800 for every minute of shutdown � working out to RM205.76 million liable by vendors assuming they were responsible for all the shutdowns. No evidence Proton ever imposed fines on vendors. The main reason given was that the vendors would be crippled financially. Termination of a vendor�s contract would result in more severe downtime, as it would take time to find a replacement.
• PwC also found that the total amount owed to Proton Edar by its dealers and Edaran Otomobil Nasional (EON) amounted to RM709 million as at end-July 2005. A substantial number of Proton Edar dealers, who together owe RM409 million to Proton Edar, had exceeded their credit limit. STB Auto, a Proton Edar dealer, sold the most cars in FY2005 (2,451 units). However it is also the largest debtor with debts of RM12.7 million, which is more than its granted credit limit of RM9 million.
• Proton investments in China via Goldstar Proton Automobile Company (GPA) and Proton Automobile China Ltd (PACL) involving problematic expenditures running into  tens of millions of ringgit.

It would appear  that the PwC  investigation and report had been drawn up  without seeking the co-operation of the Proton CEO during the operative period, Tan Sri Tengku Mahaleel Tengku Ariff  and the Proton Adviser in the last two years of the probe, former Prime Minister Tun Dr. Mahathir Mohamed.

If this is the case, then a full and comprehensive inquiry should be held to get to the bottom of the Proton finances and mismanagement mega-scandal, warranting the establishment of a Royal Commission of Inquiry with powers to summon, without fear or favour, everyone who had been involved with the sorry history of Proton right from the very first day � whether Mahathir, Mahaleel or the previous Proton Board members and management personnel..

(02/08/2006)