Thursday, April 05, 2007

The Proton saga continues

A surprisingly lucid commentary from govt owned newspaper, The Star, on the ongoing Proton negotiations to court a foreign or domestic partner.

Although it sharply criticises the delay in deciding on Proton's future, as well as points out the folly of obsessing over a "national car industry" as opposed to a "viable car industry" - The article doesn't let us forget that the paper is at the end of the day, still just a noisy pooch on a short leash. The article blames nobody in particular and quickly glosses over the real Problem with Proton with merely a passing comment on its "wealth distribution" policies.

But a worthwhile read anyway. Just be careful of the numbers in the graphic (table). I think they represent the number of cars sold each year, rather than the stated RM'000 of sales. The article below:

Proton saga continues

THE Proton saga continues. There are reports that Volkswagen would be the new major shareholder. There are also reports that the new major shareholder would be a local party. We next learnt that the March 31 deadline for Proton’s partner had not been met. In this apparently never-ending merry-go-round, ordinary Malaysians are utterly confused over the Proton story.

As consumers, all the ordinary Malaysians want is a car of reasonable quality at a reasonable price. Ordinary Malaysians have been massively subsidising Proton and at the end, we still have a company that simply cannot compete against anyone in the world.

An Australian fresh graduate can earn A$2,000-A$3,000 per month and drive a brand new Toyota Camry for A$33,000. A Malaysian fresh graduate earns RM2,000-RM3,000 per month and has to make do with a discounted Proton Saga.

What does the Government want for Proton? They want Proton to spearhead the country’s industrialisation process and at the same time, achieve income and wealth redistribution.

In the recent Geneva Motor Show, there were various attractive models from China and India. Lotus was there. Proton was absent.

Proton has tried for more than two decades and failed and will fail again if the right things are not done.

The issue to resolve is this: How can we make Proton globally competitive?

Will the local party have the skills, resources, management, alliances, experience, technologies and a huge host of other critical assets to turn Proton around? Or will it come in and give us a lifetime guarantee that millions of ordinary Malaysians will have to keep subsidising it?

We should learn from the Czechs. Their willingness to give up their national marque, the Skoda, brought about immense benefits to the economy. From a marque that sold only 120,000 cars in 1991, Skoda sold 559,821 cars in 2006, equivalent to the size of Malaysia’s total vehicle sales.

How did they do it? By bringing the marque to a globally acceptable level of quality and by building up exports. Skoda is not the only marque that has exports driving its performance (see table).

Proton has not only become a saga. No “real” explanation has been given as to why the March 31 deadline was not met and we do not know if there will be a new deadline and whether it will be met. All we know is that the whole country and its future are being held ransom to parties that do not bother to explain to Malaysians why there is another missed deadline.

In the first place, should we have a national car? Thailand does not. Taiwan does not. What is even more glaring is that even China does not have a national car project. The domestic market of China is big enough to support numerous national cars. In 2006 alone, China sold approximately seven million cars.

The skills and technology available to China are advanced enough for her to start a national car project. Yet, China has chosen a different strategy from Malaysia. China is realistic enough to eat humble pie and have joint ventures with the foreign carmakers instead of arrogantly striking out on her own. Now, we have China cars reaching our shores. Proton has yet to reach China after two decades.

Let us make our investment and business decisions based on sound commercial reasons.

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