The Big Question With Proton And Honda

While it’s not wise to read too much into statements as in the case of DRB-Hicom’ announcement that its company, Proton, had reached an understanding with Honda Japan to explore platform collaboration, it would also be a mistake to ignore it.

It was a model statement of ambiguity and flexibility… to explore opportunities in a wide scope of business areas, involving technology, products and sharing of facilities … on a non-exclusive basis.

DRB-Hicom’s press statement raised many questions including the long silence from Honda Japan (still no statement from Honda at the time of writing this on Friday night). Usually, when there’s an agreement between two big companies, there will be a joint statement. For one company to issue a statement unilaterally would mean that it’s calling the shots. This can hardly be the case in this instance.

Secondly, it could mean that the memorandum of understanding is so ambiguous that it’s too early or not necessary to issue a public statement.

Thirdly, it could mean a mere breakdown in etiquette. Barring breaches of confidentiality clauses, it would be polite for both parties to issue a joint statement.

This is not the first time that Proton’s executive chairman, Datuk Seri Mohd Khamil Jamil, has issued unilateral statements. Last year, there was consternation in the halls of Volkswagen when as managing director of DRB-Hicom,he released details about Volkswagen Malaysia’s locally assembly programme without their consent.

Proton’s proposed collaboration with Honda raises a few questions. While it’s clearly stated that it’s a non-exclusive relationship, will this jeopardise the relationship between DRB-Hicom, its owner, with VW?

On the surface, things look calm. Ricky Tay, the MD of Volkswagen Malaysia, announced that CKD plans and investments with DRB-Hicomto assemble the Polo and Jetta in Malaysia were on track. He was speaking at the launch of the TouaregTdi, VW’s first diesel-engined car in Malaysia.

However, it’s understood that there are undercurrents of concern. It’s understood that Volkswagen AG is concerned about the pricing system on the franchise AP’s needed to import its CBU model. The Germans would like a better deal on its AP’s supplied by a DRB-Hicom controlled company.

It’s said that a newteam of managers in Wolfsburg are said to be benchmarking the price at which another government-linked company supplies franchise AP’s to its brand partners.
Despite RHB Research and AmResearch both signalling Buys and outperform for DRB-Hicom, perhaps it’s time to take a reality check.

Barely one year into taking charge of Proton, DRB-Hicom’s success at managing its partnerships hasn’t been established yet.
The first casualty was Mitsubishi Motors. Before DRB-Hicom’s acquisition, Proton had already made headway with Mitsubishi Motors to collaborate on platforms and drivelines for the Asean small car market.