Hero Group talks with Proton called off?

Has the Hero Group walked away from stake-buying negotiations with Malaysian carmaker Proton Holdings Bhd? Proton chairman Mohd Nadzmi Mohd Salleh was in India early this month to meet potential partners for an entry into this market and the Hero Group was believed to be the top contender for stake-sale by Proton. But Salleh suffered a stroke while in Chennai and the meeting with Hero got delayed.

It now transpires that the Hero Group has shown disinterest in continuing with negotiations. A Hero Group spokesperson did not return calls seeking to confirm the group’s position vis-a-vis a stake-buying deal with Proton.

In the past, the Hero Group has evinced interest in entering the four-wheeler space but it walked out of a joint venture for making commercial vehicles with German major Daimler last year owing to monetary constraints. Earlier this month, the spokesperson had admitted to holding preliminary talks with the Malaysian company.

Proton, which has been unprofitable in two of the last three years, wants to form strategic tie-ups as domestic competition intensifies and the Malaysian government urges it to form a partnership that will retain Malaysia as a manufacturing hub. Proton has previously held talks with Volkswagen AG and General Motors also.

As far as entry into India goes, Proton has talked to several Indian companies including Mahindra & Mahindra, International Cars, Argentum Motors etc at various times.

At some point, Proton discussed a contract manufacturing arrangement wherein its own brand of cars would be made at the Indian company’s facility and then marketed through a separate network. At other times, discussions progressed to sharing vehicle platform technology also. In fact, early last year Proton tested the 1.3 litre ‘Saga’ and 1.6 litre ‘Persona’ on Delhi roads, planning to manufacture these models at Argentum facilities for sale in India. But none of these talks fructified and Proton has remained undecided about the Indian market.

Proton is a Malaysian government-owned company and, though its vehicles are considered high-end, quality and finishing issues remain. It has been losing sales in the home market while continuing to be plagued by very high costs per car, say dealers.

A long-time Proton dealer had told DNA earlier that the company is “rather slow in decision making since it is government-run. It is also plagued by very high cost per car because there are no economies of scale”.

He had said Proton has its own manufacturing facility only in the home country and assembly units in Indonesia and Iran. Some of its popular models include ‘Saga’ and ‘Wira’ sedans, ‘Satria’ or the Proton Compact and ‘Putra’ sporty coupe.