Thursday, May 31, 2007

Proton Lost More

The Star 1.06.2007:

PETALING JAYA: Proton Holdings Bhd failed to meet its key performance indicators (KPIs) for the fiscal year ended March 31 (FY07) as revenue dropped 37% to RM4.9bil from RM7.8bil in FY06.

It posted a whopping net loss of RM591.4mil against a profit of RM46.7mil previously. Loss per share stood at 107.7 sen compared with earnings per share of 8.4 sen in FY06.

Proton has almost depleted its cash reserves of RM3 billion after the new management took over since end of 2005.

When the new management took over, I was sceptical. I thought the government made a wrong move by appointing new people into executive positions at proton when the previous management did not do too badly, having accumulated cash reserves of more than RM 3 billion.

At the back of my mind, I had an inkling that the Proton's financial results that were to come thereafter would show it to be in a worse rather than better condition but of course I couldn't say for sure. The reasons for the shake up at Proton previously was not that of mismanagement, but it seemed more of a political appointment in order to get rid of a certain individual who had a mind of his own, who would stand up and speak out, whatever the costs.
After the old CEO was dropped out, the sale of Augusta too effect at a sobering Euro 1 although the motorbike itself was chosen to be the best motorbike in the world for that particular year. The reason given was to streamline operation and concentrate on its core business as well as cut losses. Proton wanted to go into collaboration with other car makers, one after another, with deadlines extended but without much success, until now. It then expressed desire to pay off RM150,000 for each vendor that was to close shop as compensation (I didn't know it was so lucrative to close a non-viable business until Proton showed that it can be so).

I had a feeling that Proton was to be in worse hands after the management shook out. Not because its CEO seemed overconfident or even sounding arrogant.

And today, I was proven right. It is about time that the government acknowledges its mistakes and right its wrong.


Daily Nibbler said...

Sad, isn't it? What is Pak Lah, the level four boys, Khazanah, the new Proton management doing about it after taking over a few years? Can't help be feel that the whole thingy was premeditated to make Tun and his pet project look bad. And predators are waiting in the wings for the kill.

Muhammad Ilham said...

hi dr asrul,

for sure, the current management is bad, or else, it wouldn't have made such an unbelievable loss of half a billion. half a billion. the amount still rings in my ears. it's absolutely unbelievable.

let us then turn our attention to the previous management. ok, cash reserves of 3 billion must be saying something about their capabilities. they must have done something good. or did they?

we have to consider other external influences when we compare the past and current situation in proton. proton made loads of cash mainly because of protectionist policies, let us not be fooling ourselves by saying that is not the main reason.

why do i say that? because if it wasn't for protectionist policies, what else could we attribute proton's success to?

state of the art technology? don't think so. not with crap automatic windows and malfunctioning gearboxes.

revolutionary design? again no. the only proton car i really fell in love with was the perdana. only one out of how many models. also, proton seemed to run out of ideas towards the end when they recycled the proton saga and iswara, by merely updating the technology in the car, ie, replacing cheap plastic interior, with, err.. new cheap plastic interior. cheap plastic interior, a new design it does not make.

patriotism? yes, malaysians were patriotic, and we truly loved our protons. but was it the main reason? nope.

the main reason was protectionist policies. and in essence, it was the wide distribution of APs that killed proton. or was it?

no. dr asrul, i shall tell you now what really killed proton.

it is because proton kept churning out low quality cars. it was okay to do so in the beginning, we all have to learn to crawl before we walk. and protectionist policies WERE NEEDED to help proton mature and learn how to run. and indeed, proton did mature and run.

but to what extent? the only thing that matured and ran was proton's coffers. 3 billion ringgit worth of funds. 3 billion. amazing.

but apart from that, did they accomplish anything else? more importantly, did they do anything else to improve themselves?

nope. proton's biggest mistake was to rest on its laurels. with 3 billion in its coffers, it should have pursued greater technology and more innovative designs.

dr mahathir should have said this to proton, "ok, you've done really well to become established in our country, now i want your engineers to improve the technology and the QUALITY of the cars, so that we can compete with other carmakers without having to resort to eternal protectionist policies". that was what mahathir didn't say though. and proton didn't pursue on improving the quality of their cars.

that is where they went wrong. dr asrul, perhaps the current management is made up of incompetent people. but i assure you, even if mahaleel was still at proton, and still proton stayed stagnant and didn't improve their cars, it would have only been a matter of time that a mahaleel-led proton would make a half a billion ringgit loss.

so the question we have to ask, is, if only mahaleel was still in charge of proton, would proton be in this state now?

the answer to it is another question. would mahaleel have asked proton's engineers to improve the quality of the cars?

because it he had said that, then, no doubt, even if proton was slightly more expensive than jap cars, malaysian's would still be buying them left right and centre if the quality was good.

alas, that question will never be answered. it's all hypothetical.

what a sad chapter in proton's history.

we need proton to really improve the quality of their cars. because even if proton was under alan greenspan, or carlos ghosn, nobody would buy it if the quality was still poor.

what pisses me off big time though, is Tidur Lah's instructions in the utusan. senang aja cakap, saya tak kisah, apa proton kena buat, buat, supaya tak buat rugi lagi.

alahai Tidur Lah, any monkey could have said that. what would differ a competent individual from a monkey is whether you can give some constructive, creative suggestions.

Asrul Zamani said...

Muhammad ilham

I agree with what you are saying and as a matter of fact, i too have similar held beliefs regarding the inadequacies of Proton.

However, what I wish to stress out here is that, the old management has done a rather remarkable job, not withstanding some quality defects and the lack of new models. The new management, has left much to be desired.

Protectionist policy aside, proton did at the end manage to develop its own engine and reduce royalty paid for those mitsubishi engines, and royalty to the Japanese firm is a large portion of Proton's expenses.

Two new models such as the new satria neo and gen 2 were launched in the last years and were developed during previous management. And we know there are more models being developed by the previous management that were only to bear fruit at a slightly delayed schedule. Not to mention the acquisition of Lotus and Agusta, two motor companies with high technology in their own domains. So from here, we could see that although at the beginning Proton were just reassembling mitsubishi cars, but after 20 years it was really pushing towards being a full fledge car maker, and it does not take a short time to being a reliable car makers cf toyota, ford, Hyundai etc which take much longer than the 20 years Proton had. So given the time frame Proton had, it was still a remarkable feat achiving what it had in mere 20+years.

Protectionist policies is a debatable issue. Even the EU and the US as well as Japan and many other developed countries of the world even France have protectionist policies on some of their products. So when we are developing a nascent technology which we deem essential for the long term progress of the country (eg car making etc etc), there must be some form of protectionism or incentive for a given moment. Sure, those countries that have achieved economies of scale can label us being protective of Proton and demand that we remove those policies (so that they can sell their cars here), but they too cannot wash their hands clean of protectionism.

From reports that I've read, the loss of some nearly RM600 million is only the tip of the iceberg. What has not been mentioned in the recent report is that the RM3 billion that Proton amassed has now depleted to a mere RM500 million, a loss of RM2.5billion. A loss of cash reserves of RM2.5 billion is not usual given that it occurred less than 2 years.

What I am saying here is that the new management has actually hasten the demise of Proton. We will not know for sure had Mahaleel been there at the helm if this would be repeated. But I seriously Mahaleel would have cause this sort of damage to Proton. And the policies of AAB and the current administration's NAP policies and the issuance of excessive permits and the underdeclaration of value of imported cars have all the more pushed Proton off the edge of the cliff.