Proton Saga

Sometime back they shut the door on each other, now, they are talking again. Malaysian national car maker, Proton, is holding desperate talks with Volkswagen AG (VW)in order to save itself from the funeral parlour.

A brainchild of the former Prime Minister,Dr.Mahathir, Proton was conceptualised to fast track Malaysia into the ranks of the industrialised nations, the saga of this company has all of Malaysia intrigued worthy of the best soap operas on TV.

When the idea was first mooted in the 80s, many Malaysians were skeptical, and even the then Deputy Prime Minister, Musa Hitam, cited Proton as one of the reasons for him wanting to resign from the post .He didn’t see how it could be a success.

Dr. Mahathir was persistent and he personally saw the idea through. Many Malaysians saw him as the CEO of the company, even overriding the board, but, he was the strong-willed Prime Minister, wasn’t he?

Proton went through some good times initially as Malaysians came around to support the home -made car backed by the war cry of “Malaysia Boleh” (Malaysia Can). Dr. Mahathir showed everything was possible with dedication and hard work.

Proton started off with the play on technology transfer from Japan’s Mitsubishi , later, it flirted with France’s Citroen and Proton even bought into Lotus to try to get the best technological hook-up available. Malaysians cheered, while visiting the United Kingdom, many used to feel extra proud when they saw many Protons on the road there.

There was even a hugely popular Kadazandusun song called “Proton Saga Kalabu” (The grey Proton Saga), this cheeky song tells of a young divorcee who would only show interest in would be suitors if they drove grey Proton Saga. The song was later made into a VCD movie. Our national car has really made a great impression on the people and it has even become a part of our pop culture.

Then, many also asked where the national car-maker was going with the eclectic approach. Where was the technical focus?

Like the wise say all things must pass, and Proton was no exception. As soon as Dr.Mahathir retired, Proton CEO, Tengku Mahaleel was sacked, of course Dr. Mahathir was livid even though he was still Proton’s advisor. Without the political clout, Dr. Mahathir was ignored by the ambitious and repressed people in the company.

Leadership changes were made, left on its own, Proton lost its direction and apathy set in. From a cash rich company, now, it’s bleeding to death.

For the recent fiscal year which ended March 31(FY07), we see revenue dropped 37% to RM4.9billion from RM7.8billion in FY06. Proton posted a whopping net loss of RM591.4 million against a profit of RM46.7million previously. Loss per share stood at 107.7 sen compared with earnings per share of 8.4 sen in FY06.

Many reasons were given for this woeful performance, it was attributed to a challenging operating environment,which saw intense competition compounded by lower used cars value and stringent loan application screening that put credit squeeze on prospective buyers.

Managing director Datuk Syed Zainal Abidin explained that the losses were due to lower sales volume and other factors including one-off expenses and provisions.To put it on the right track, Proton will focus on operational efficiency, cost competitiveness, introduction of new models and more aggressive marketing campaigns, he said.

While all these standard attempts will take time to bear fruits, many are not convinced that Proton, which is owned by the Government’s investment wing, Khazanah, will see the light at the end of the tunnel unless the company is run more professionally.

The government must act fast and do what needs to be done to stem the bleeding. If Proton has to be sold to foreign parties, so be it. One can argue about nation’s interests until the cows come home, at the end of the day it is the bottom line, unless, the government is contemplating a bail-out again.

Nissan was a sick car-maker, by teaming up with Renault, the man sent to sort out the mess, Ghosn, managed to turn it around. If the extra nationalistic and proud Japanese could accept this reality, Malaysians had better do the same.

Proton needs an experienced outsider to run it, a local person tends to spend time pleasing the various political factions, this will not get us anywhere.Tough decisions on factors such as quality and efficiency need to be made. In other words, go the commercial way, you either shape up or ship out.

VW is keen to establish a foothold in South East Asia through Proton, among its numerous strengths, it has the track record of turning ailing Czech based Skoda around. With the famous German clockwork efficiency , hopefully, Proton can look forward to better times once again.