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Saturday April 16, 2011

Proton secures financing for Lotus turnaround

By JAGDEV SINGH SIDHU
jagdev@thestar.com.my


KUALA LUMPUR: Lotus Cars Ltd, a wholly-owned subsidiary of Proton Holdings Bhd, has secured 270mil (RM1.33bil) in financing for its turnaround plan where it hopes to break even in 2014.

The 270mil funding, which is part of a 480mil 10-year turnaround plan for Lotus, would be primarily used for product development. To execute its future plans, Lotus will start with the upgrade of its facility in Norwich, England.

“Lotus has been owned by Proton for the past 14 years and there is strong potential for the company to grow,” said Proton Holdings group managing director Datuk Seri Syed Zainal Abidin Syed Mohamed Tahir at a media conference after signing for the loan yesterday.

The 270mil was extended through a syndicated loan involving six financial institutions. They are CIMB Bank Bhd, Malayan Banking Bhd, Overseas-Chinese Banking Corp Ltd, Export-Import Bank of Malaysia Bhd, Affin Bank Bhd and EON Bank Bhd.

Proton said with the loan, the external portion of the funding was now in place and together with internal funding, Lotus has raised the required funding to realise its future plans.

The Lotus Esprit has attracted 3,700 buyers. It will be rolled out in the spring of 2013.

“After receiving a huge amount of funding, Lotus has to make money. Proton had to do something otherwise Lotus will be out of business one day,” said an auto analyst.

Group Lotus chief executive officer Dany Bahar said the turnaround plan of Lotus was on track as the company enters the second year of the plan.

“The first year has met expectations,” he said, adding that Lotus aims to emulate the turnaround plans of other illustrious sports car makers such as Aston Martin and Porsche which at one time were not in the pink of health.

“They have managed a successful turnaround and that is what we hope to do,” he said.

Bahar said it would take two to three years before the turnaround plan started generating profit.

Even though the plan might be ambitious, Bahar said it was good to have stretched targets to meet.

He said there was some grounds for optimism as the first car lotus scheduled for production, the Lotus Esprit, had attracted 3,700 buyers. It will be rolled out in the spring of 2013.

Lotus hopes to sell between 6,500 to 7,000 cars per year of the five models it will build.

“There have been ups and downs and the results will come when the new models are introduced from 2013,” said Syed Zainal.

“It's going to be a painful journey.”

As Lotus' performance improves, Proton believes it will benefit in terms of branding, product development as well as sales and marketing.

Syed Zainal also said Proton, which incured capital expenditure of RM700mil to RM800mil a year, might be increasing that amount as competition in the auto industry was getting stiffer.

“We have to raise the bar on investments,” he said.

He said Proton has been encouraged by the sales of its passenger cars recently.

“That augurs well for our financial results,” he said.


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