Little hope for Proton, uphill for Syed Mokhtar but Mahathir is overjoyed

Mahathir’s Mohamad’s hare-brained scheme, Proton, has been virtually given the last rites if we wade through Bernama’s twisted take recently on a report by Frost & Sullivan on the national car maker and read between the lines on its takeover by DRB-Hicom.

The national news agency, a vulture that has for long been preying on the unsuspecting and gullible, can take a perfectly good report and bring shame to it under the guise of journalism.

Borrowing from Alan Greenspan

Frost and Sullivan (FS), for the unfamiliar, is a global business research and consulting firm which offers market analysis, market research and reports.

Patently, FS has couched its report on Proton in quite a bit of Greenspeak, a language which first gained notoriety during the tenure, 1987 to 2006, of Federal Reserve Board chairman Alan Greenspan who was given very much to pontificating sanctimoniously in a careful and coded way. The FS language was enough to give Bernama an excuse to indulge in a 007-style licence to kill James Bond journalism.

Still, FS isn’t saying anything on Proton that’s not already known to the long-suffering Malaysian motorist. This serial glutton for punishment has been palmed off time and again, too many times, with the same outdated Proton engine from 1981 under various cosmetic variations to the body design.

If anything FS has confirmed that the last nail would be hammered sooner rather than later into Proton’s coffin and that’s assuming that we would not be saddled with, heaven forbid, another bailout by the Public Treasury.

Very tall order

FS thinks that “to be competitive” (survive), Proton needs economies of scale (need to produce more to break even); high levels of capacity utilization (the plants are running at very low levels); access to technology (design new engines for Proton) and more markets (again for Proton, the world isn’t interested so far) including the developing countries (is it easier to scam them with an outdated third-rate product?).

FS suggests that DRB-Hicom “leverage its global distribution and assembling alliances in order to achieve this (the aforesaid).

To add insult to injury, FS ventures without batting an eyelid that DRB-Hicom does contract assembling (that means don’t just turn out Proton cars) for other global partners in Malaysia. This is expected to increase utilization of the present Proton plants which were no doubt built, although not needed, so that some people could make a lot of money in a very short time through grossly-inflated construction contracts.

If assembling various makes locally isn’t enough to make full use of the Proton plants, FS has another bright idea: assembling opportunities for the regional market. FS seems to have overlooked that Thailand, Indonesia and the Philippines, if not Vietnam, all also have their automotive assembling plants and are hungry to do contract manufacturing for the regional market.

If all the above can be done, and that’s a tall order, FS predicts that vehicle prices in the mass market segment will go down “and this in turn will expand market potential”.

Fleeced for 30 years

Here’s proof enough at long last that the Malaysian motorist has long been fleeced, forced to pay through the nose for cars because the presence of Proton has grossly distorted the market. The news comes 30 years too little too late. In any case, Proton freeing the local market will only increase the sales of other cars, not the national cars.

DRB-Hicom, if FS is accurate in its analysis, will go for quick gain opportunities to improve Proton’s competitiveness: critical efficiency improvement (don’t pad the workforce with just one community); cost rationalization decision (many of the vendors and suppliers, all Bumiputera, would have to be dropped). Here, Umno might step in and force Proton to keep the Bumiputera vendors and suppliers despite their expensive and shoddy products.

It’s surprising that FS didn’t recommend that Proton forget its national car maker tag and shift its largely idle plants to India and China, the future of the global automotive industry. More competitive components are available on the world market, especially from India and China. That would be the key to the ultimate survival of Proton.

Syed Mokhtar won't be able to do it

The thesis statement in the FS report is clear.

No one in his right mind seriously expects Syed Mokhtar al-Bukhary to make a go of Proton, anymore than Tajuddin Ramli could do with Malaysia Airlines after earlier running a two chopper company into the ground. Likewise, it’s a losing battle at Proton.

Tajuddin, in his genius, bought MAS at RM 4.00 a share from Khazanah Holdings and sold it back, bankrupt, at RM 8.00 a share. DRB-Hicom, linked to Mokhtar, which took over Khazanah Nasional Bhd’s stake in Proton, can be expected to go begging bowl in hand to the government in the not too distant future and probably to get rid of Proton in the process. Otherwise, i.e. if they don’t beg for government aid, the sky will fall down.

Sale price a steal!

Proton Advisor Mahathir is not so pessimistic. He’s jumping up and down with joy that a local company, and a Bumiputera one at that – obviously, they have two horns on their head unlike others --, managed to get its hand on the so-called national car company. The fact that the term Bumiputera isn’t mentioned in the Federal Constitution seems to have escaped Mahathir.

Not surprisingly, he failed to mention that the Proton sale was a steal at RM 1.29 billion. DRB-Hicom probably indulged in a leveraged buy out – mortgaging Proton to the banks – to take over the national car maker. In short, DRB-Hicom wouldn’t have forked out even a sen to buy Proton. They have nothing to lose if Proton goes under. The incentive to succeed at all costs isn’t there. Failure is an option.

Harakiri and Dr M

Whatever happened to Mahathir’s earlier hopes, piously expressed in the local media, that a rich foreign company would buy Proton, obviously to throw their hard-earned money down a bottomless pit? He even went on to say callously and shamelessly that he doesn’t care what happens to the foreign company – he means their money – and that he’s only worried about Proton.

In Japan, the head of a motor corporation would have committed hara-kiri after driving the company to ruin. Mahathir carries on as before, Proton Advisor, and shamelessly at that as if nothing has happened to incriminate him in Proton’s near bankruptcy status.

The big talk from DRB-Hicom is that their objective is to make Malaysia a preferred automotive hub capable of rivaling its neighbours. This objective is acceptable, even if not achievable, provided that it’s not at the expense of the Public Treasury and the long-suffering motorist.

Malaysia Chronicle would like to append below one of the many spoofs appearing in cyberspace on the deal, some of which have obviously been 'doctored'. Sad to say, it reflects what most Malaysians think about the deal.

Malaysia Chronicle