In newsstands throughout the country, the New Straits Times carried the headlines 'Strong sales, so Proton drops partner option', while The Star went head to head about the same topic with 'Govt: Proton has turned the corner, does not need foreign partner'.
After a year of prolonged - and obviously arduous - discussions, it appears that the state owned Proton Holdings Bhd has decided to rebuff possible alliances with Volkswagen AG and General Motors Corp.
The reason? Proton is getting stronger all by its lonesome, thank you very much (editor: really? some evidence say otherwise) as implied by our most popular of local dailies:(The Star: Wednesday, November 21,2007): The negotiations for Proton between Khazanah and two major international car manufacturers - Volkswagen and General Motors - have been called off.
Second Finance Minister Tan Sri Nor Mohamed Yakcop said there would be no foreign partner for Proton for the time being as the national car manufacturer was showing signs of a turnaround.
(The NST: Wednesday, November 21, 2007): Proton Holdings has ended all negotiations for a possible tie-up with Germany's Volkswagen AG and the US-based General Motors Corp.
The national carmaker will not be seeking a foreign partner for now, given an improvement in its sales and exports, Khazanah Holdings Bhd, Proton's main shareholder and the investment arm of the government, said in a statement yesterday.
While it cannot be denied that such an overt display of support for the local industry is to be applauded, Bloomberg.com has published a similar story, "Proton Shares Post Record Decline as VW Talks End."(Bloomberg.com: Wednesday, November 21, 2007): Proton Holdings Bhd, Malaysia's state-owned carmaker, posted a record one-day decline in Kuala Lumpur trading after the government ended alliance talks with Volkswagen AG and General Motors Corp.
Proton slumped 19 percent after Malaysia's state investment unit yesterday said it scrapped a year of talks to give the carmaker more time to reverse five quarters of losses. A strategic alliance can be considered later if necessary", the agency said in a statement.
The Edge Daily had only two days earlier carried the story "Proton to attract attention on imminent VW deal", inferring that the strengthening of Proton's stock was predominantly due to investor interest between Proton and Volkswagen AG:(The Edge Daily: Monday, November 19, 2007): Proton Holdings Bhd is expected to continue attracting investors’ attention in view of an impending sealing of an agreement with Germany’s carmaker Volkswagen AG (VW).
The stock rose as much as 18 sen last Friday, but eased at the close with an
eight sen gain to RM5, with a total of 2.65 million shares traded.
Researchers and analysts postulate that the decision to shelve a strategic alliance or partnership with an established international company may be detrimental to the long term sustainability of Proton, as shown in the following excerpts from Bloomberg.com's article:"Proton lacks global competitiveness as it has a poor brand image, has no real global presence to speak of and lacks the necessary technology to compete," Sharifah Farah, an analyst at CIMB Investment Bank Bhd.
"They don't have the resources to make it on their own," said Raymond Tang, who oversees $5.4 billion at CIMB-Principal Asset Management Bhd. in Kuala Lumpur. "The company needs new technology from a partner."
"Although management has done a commendable job at turning around the company, it probably won't be enough," said Vincent Khoo, head of research at Aseambankers Malaysia Bhd. in Kuala Lumpur. Proton still needs a partner, he said.
After the publicised loss of RM500 million incurred by Proton at the end of its financial year on March 31, where the car manufacturer was said by some to be in a "death spiral", detractors are now decrying this decision as a case of "Pride goeth before a fall".
Wednesday, November 21, 2007
Proton: Pride Goeth Before A Fall
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3 comments:
The figure of RM500 million loss is just the tip of the ice-berg. Seputeh MP Teresa Kok made a comment about it in Parliament not too long ago:
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Taken from teresakok.com November 12th 2007 posting,
"Proton:
Proton telah rugi RM591 juta dalam tahun kewangan yang berakhir 31 Mac 2007.
Saya difahamkan bahawa kerajaan akan memberi excise duty concession selama 6 bulan kepada Proton, ia bernilai dalam lingkungan RM200 juta, dan yang mana tidak akan dibayar balik oleh Proton.
Selain itu, kerajaan juga memberi RM30 juta sebagai ‘pampasan’ untuk dealer yang berhenti urusniaga.
Sekiranya kita tambah kesemua peruntukan kerajaan kerajaan kepada Proton, maka jumlah kerugian Proton sebenarnya ialah lebih kurang RM900 juta.
Saya difahamkan bahawa kerajaan akan memberi grant sebanyak RM200 juta kepada Proton untuk menjalankan R&D, apakah ini benar? Apakah rancangan atau projek yang akan dilakukan oleh Proton melalui grant RM200 juta ini? "
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So, how can the Second Finance Minister say the management of Proton is turning things around? If what the MP for Seputeh says is true, then the actual figure, taking all hidden losses into consideration, amounts to almost double the publicized figure.
So where is the logic in not having a strong reputable partner? VW and GM have good track records in reviving failed car companies and turning them into reputable brands themselves. Skoda, Holden, Vauxhall, Daewoo, Opel etc. are just some names that come to mind.
Although not all these brands are sold or are best sellers here in Malaya, they do have strong footing elsewhere. That is where the presence of a strong partner is required, to tap into those export markets that Proton have failed to or never tried to enter before.
What short sighted thinking on our government's part! then again, since when has our government, past and especially present, ever thought that far ahead....
Nicely sourced, Melayu Lama! To add on to what you said, here is a excerpt of an article titled "Proton's Can of Worms" from theedgedaily.com that ran August 1, 2006:
"Proton also spent RM4 billion on R&D projects from October 1998 to July 2005.
"Of the amount, RM2.3 billion was spent on completed projects, RM1.3 billion on on-going projects, RM300 million on projects that are now on-hold and RM85 million on projects that had been scrapped.
"The report noted that the bulk of R&D spending was in the area of development and production preparation.
"Spending on feasibility studies was insignificant."
So it Theresa Kok is right, RM200 million isn't going to help much, especially if Proton still not willing to spend on feasibility studies :)
For the RM 30 million 'compensation' paid to vendors, the same article has said:
"PwC in its report stated that from April 1, 2002, to July 31, 2005, Proton's plants in Shah Alam and Tanjung Malim experienced a total of 41,965 minutes of shutdown caused by vendors.
"The vendor responsible is required to pay RM3,800 for every minute of shutdown. Another 12,182 minutes of shutdown were recorded but the name of the vendor responsible was not recorded.
"Assuming all the shutdowns were due to vendors, they would be liable to pay up to RM205.76 million.
"However, PwC said it could not find any evidence of Proton ever imposing fines on vendors. The main reason given was that the vendors would be crippled financially.
"Termination of a vendor's contract would result in more severe downtime, as it would take time to find a replacement.
"PwC also found that the total amount owed to Proton Edar by its dealers and Edaran Otomobil Nasional (EON) amounted to RM709 million as at end-July 2005.
"A substantial number of Proton Edar dealers, who together owe RM409 million to Proton Edar, had exceeded their credit limit."
I know this is old news, but it is nice to see Proton taking care of it's vendors, isn't it :)
aiya if proton were to sell then half of them are out of jobs. too many management people doing nothing, too many executives doing too little, too many vendors not doing enough.
if vw comes in, all of this is over, so better take care of rice bowl than to rock the boat.
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