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Proton transformation? Have to see to believe

POSTED BY Amirul Hazmi ON 14 April 2016

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By: Yamin Vong

TOK Pa as the Minister of International Trade and Industry is fondly named was the guest of honour at the launch of the Maxus MPV on Wednesday.

The venue, Menara Weststar, beside the entrance to Zoo Negara was brimful of well-wishers, business associates and friends of Tan Sri Syed Azman, Weststar group managing director, and one of the handful of businessmen who have successfully transformed themselves from AP holders to captains of industry.

As soon as the cover was lifted off the 10-seater Maxus G10 MPV, the press scrummed around Datuk Mustapha Mohamad as the technocrat minister is fondly nick-named to pepper him with questions about the Proton transformation plan.

He adroitly sidestepped that by saying that anything about Proton’s transformation should be referred to Idris Jala.

Datuk Seri Idris Jala, Minister without portfolio in the PM’s Department was last week appointed by the government to head a task force to oversee the transformation of Proton Holdings Bhd, the corporate owner of the national car, Perusahaan Otomobil Nasional (or Proton).

Proton had earlier applied to the government for help in settling monies owed to its vendors.

At the weekly Cabinet meeting last Friday, the government agreed to allocate a RM1.5 billion soft loan to Proton. In exchange Proton needed to satisfy the government that Proton could be transformed into a profitable unit.

The government also announced a task force to oversee that Proton would take all the necessary action plans to ensure commercial viability. The most important priority was to immediately identify a car company for a strategic partnership to build up market share in Malaysia and Asean.

How to re-make Proton into a successful car maker? Consider the character of Proton. It is moulded as a national car company.

Boosters are proud to say that Malaysia is one of only a few countries in the world that can make its own car.

This proud boasting is irrelevant in a world where German and Japanese car brands share resources to research and develop alternative fuel sources.

As a result of this type of national chauvinism, Proton’s managers and political leaders have rejected proposals from Volkswagen and GM.

Proton signed a memorandum of understanding with Suzuki Motor company in the middle of last year. Will this be another failed joint-venture?

It will be a good thing for the Task Force to consider. Osamu Suzuki, the patriarch of the Suzuki company, gave the MOU with Proton his blessings but observers say that things are not going well.

Suzuki managers are flabbergasted by the “not invented here” attitude of Proton managers.

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First, Suzuki proposed the 2.4 litre Kizashi passenger car as a replacement model for the Proton Perdana. Proton managers said “Cannot, we already have the Honda Accord”. And yes, Proton is in fact expensing millions of ringgit to redesign the preceding model of the Accord to re-badge as the new Perdana.

Then Suzuki offered the Swift for Proton to re-badge and sell and earn money. “Cannot. This will kill our Iriz.” In the car industry, principals are very particular about the models they offer for partners to CKD and sell. In this case, Suzuki officials had offered up its Swift hatchback so that Proton could re-badge it quickly, sell it and earn profits to re-build its war chest.

SUZUKI-Ertiga-5073_10The latest development is that Suzuki has also offered its mini-MPV, the Suzuki Ertiga which is popular in Indonesia. “Oh nice, but we’ll have to R&D and improve the interior design for the Malaysia market. It will cost about RM100 million and 18 months.”

Suzuki officials are now seriously concerned that their MOU with Proton will meet the same fate as with VW and GM. The cynics say that the culture of spending a lot of money on R&D, redesigning cars, and making their own engines is also a good way to travel overseas, earn overseas allowances, and get some kickbacks. It’s self interest, not patriotism, they say.

Secondly, there are too many gate keepers in Proton and not enough trust in its managers. Whether deadwood or productive, they all have to submit their plans to their own Proton board, then to Edar Board, and then to DRB board for approval and sign-offs.

By the time a decision is made, Perodua would have sold a few more thousand cars and the market might have changed.

Within Proton itself, the approval process has to go through the risk management team, the transformation team and the audit team.

The government’s insistence that there should not be any more political interference has also to be seen to be believed.

The US government bailed out GM and after re-badging it as a newco without the baggage, the new GM is a profitable company.

Perhaps the biggest challenge facing the task force is whether Proton can change its culture from national car champion to being a profitable mainstream car maker for the Asean market of 600+ million people.

Can Proton be transformed? Malaysians certainly hope so. A successful regional champion is something they will be proud of.

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