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Monday, January 9, 2012

Time for truth about Proton be known.

Joe Fernandez | January 7, 2012 - original article 
The government’s stake in Proton is again up for sale but will there be a suitable suitor?


Not a day goes by without the mainstream media hinting that somebody or some conglomerate is reportedly contemplating a bid for the government’s 42.7 per cent stake in Perusahaan Otomobil Nasional (Proton), the long ailing national car maker.

Proton advisor and former prime minister Dr Mahathir Mohamad has been quoted as saying that he hopes “a very rich company” will buy Proton.
In a contradiction in terms, he shamelessly confessed that he doesn’t care what happens to other companies – presumably the suitors – but he worries about what happens to Proton.
This is the same Mahathir, who not so long ago, joined the Proton management in vehemently opposing any foreign takeover of Proton.
Their myopic opposition has seen several billion ringgit from Petronas, where Mahathir is also advisor, thrown into the bottomless Proton pit. This is money mostly from Sabah and Sarawak where each state get a measly 5 per cent royalty from the wells in the inner waters and none from the outer waters where the bulk of the production is carried out.
Sadder, but hopefully now wiser, the recalcitrant Mahathir and the Proton management have no doubt realised that they can no longer rely on Petronas funding to continue to bail out Proton.
The tax-payers and people in Sabah and Sarawak would no longer stand for it unless Mahathir wants to be accused of being a “thief”.
The latest story is about Proton Holdings Bhd chairman Mohd Nadzmi Mohd Salleh expressing an interest in the privatization of Proton. For starters, Proton is already private, so how much more private can it be?
Having said that, the question that can be raised is this: “Just who is Nadzmi?” No one is impressed with his so-called track record. Everyone knows that such track records are a dime-a-dozen in the aftermath of the New Economic Policy (1970-1990).
Most of the Nadzmi types make money in the re-shuffling of assets with the right hand buying from the left hand in incestuous arrangements.
In the most notorious of such arrangements, the federal government sold a thriving Malaysia Airlines (MAS) to Tajuddin Ramli whose only experience of the industry is a helicopter company with two machines. Tajuddin bought MAS at RM 4 a share.
Years later, the government bought virtually bankrupt MAS from a chastened Tajuddin at RM 8 a share. Several billion in public funds were flushed down the drain in the blink of an eye just to prove that some people can do business.
MAS, thrice bankrupt and headed for a fourth bankruptcy before Tony Fernandes (*another crony?) of Air Asia marched in through a (*heavily suspected) share-swap arrangement, is an example of the history of failures besetting corporatization, privatization and the GLC sector in Malaysia.
Old engine under new hood
The fact is that Proton is a hare-brained idea, indeed a scam of the highest order against the long-suffering Malaysian motorists, and should be wound up immediately.
Proton has survived for years by distorting the vehicle market in Malaysia and this is one option which it can no longer rely on, given the opening up of the market in Asean.
The thrust of car manufacturing is the engine which takes several years to develop and at least three years in commercial production to re-coup the cost of development. It’s from the fourth year that a model can make money but not for long since a new engine model would have to be introduced every three years to match market expectations.
No car manufacturer in the saloon range can break even unless it can sell at least a million units a year. This assumes that all other car components, besides the engine, are sourced from an efficient network of independent suppliers and vendors.
One million a year – think Toyota — is a number that Proton will never reach and this factor alone thereby underlines the sheer unviability of the so-called national car maker.
From its very first entry into the market until today, more than 30 years later, Proton has been peddling the first engine in cosmetic variations because it could not afford to design, neither did it have the engineering capability, to produce new engine models every three years.
Proton could of course buy new engineering designs from the Japanese, as it did with the first from Mitsubishi, but such purchases don’t come cheap.
Again, that assumes the Japanese are willing to part with such designs, which they are not. Why should the Japanese shoot themselves in the foot? They will never sell the latest engineering design but may be persuaded to part with something that they don’t really want.
Mitsubishi took Proton for a ride by selling it the engineering design of a model which had failed in the local and Singapore market. To add insult to injury, the Japanese sold Proton old manufacturing jigs by passing it off as new.
It’s also a known fact that Mitsubishi is a failing company in car manufacturing and has been failing for a long time, in fact from even before it teamed up with Proton.
The Proton Saga was Mitsubishi’s way of increasing its market share in Malaysia against competition from other Japanese makers and western companies.
Chasing the Volvo standard
In return, Mahathir sold the idea to us that we now had a national car, thanks to his Malaysia Boleh (Malaysia Can) slogan.
Why would any country need a national anything? No other country in the world has a national this and a national that.
Sweden has a population of only nine million, compared with Malaysia’s 26 million, and yet the country churns out Volvos and Saabs – the latter not doing so well – for the world market. Saab even makes fighter jets with some measure of success.
The only thing that Volvo, for example, manufactures is the engine. The rest of the components are sourced from within Sweden and worldwide.
Volvo is an example of how to make a car. Volvo is everything that Proton will never be capable of emulating.
Besides, Proton has so much political baggage in the form of the management and the network of inefficient local vendors all linked to Umno.
No global car manufacturer worth its salt will buy Proton and keep it going as it is.
That’s perhaps why people like Nadzmi are entering the picture so that the government can save face on a continuing dilemma.
Such people, as seen in the case of Tajuddin Ramli, are no solution. They will be begging the taxpayer for a bailout before long to make a killing in the process.
* editor's note [does not fully reflect the blogger's opinion]