Malaysia's struggling national automaker Proton has lifted the lid on its purchase of debt-ridden motorcycle maker Agusta, reportedly saying that its board was not aware of the pitfalls of the acquisition.

Proton bought a 57.75 percent stake in MV Agusta Motors SpA in 2004 for 70 million euros but was forced to sell the company and its frozen debts of 106.9 million euros in December to Italy's Gevi SPA for a token sum of one euro.

Proton chairperson Mohammed Azlan Hashim said the board had no idea that Agusta minority shareholders retained veto powers, which he argued were used to foil Proton's efforts to restructure the company.

He said the board was also unaware of the extent of the Italian company's losses when the purchase was made and discovered in August last year that it needed additional capital to stay afloat.

"This was also the first time we discovered that in addition to the 70 million euro investment in Agusta, the Proton group had subsequently injected further sums of money in Agusta," Azlan was quoted as saying in the Star daily.

Without board's knowledge

He said a cash advance of 9.0 million euros was given to Agusta from Proton subsidiaries, as well as a credit line of an additional 30 million euros.

"This was done without the knowledge of the board," he was quoted as saying in the New Straits Times .

Azlan's comments were a veiled criticism of former Proton chief executive Mahaleel Ariff, who oversaw the purchase of Agusta and was ousted last July.

Mahaleel and Proton advisor and former prime minister Dr Mahathir Mohamad have strongly criticised the Agusta sale, demanding information on why it went ahead and saying their credibility is at stake over the deal.

Proton suffered a net loss of RM154.33 million (US$41.82 million) for the second quarter to September 2005, which it attributed to provisions for Agusta. Azlan said the Malaysian carmaker could not afford to sustain its debts.

Agusta needed to sell some 44,000 motorcycles a year to break even but had only averaged sales of about 14,000 annually for the past six years, he said.

"The company was really in dire straits," he said.