MITI suggests Proton to identify strategic foreign partners

Proton Suzuki confirms partnership Following the departure of Tun Dr Mahathir as Chairman of Proton, the crisis continues to thicken… The latest buzz involved the Malaysian Government branch of the Ministry of International Trade and Industry (MITI), Proton’s greatest backers prior to its privatization in 2012. There is now a high probability of Proton being sold to a foreign auto manufacturer or brand, or the National carmakers are to merge with another major player in the industry to continue existing in the automotive stratosphere.

According to the International Trade and Industry Minister Dato’ Seri Mustapa Mohamed, the decision by the Government to partake in the automotive industry via Proton in the mid-80s was a brave one. He stressed that the Govt. cannot continue to protect the National carmakers in a long run and hence, Proton was privatized by second quarter of 2012; after nearly 30 years. When Mustapa took over at MITI in 2009, Proton bigwigs had presented the minister with company restructuring proposal which was aimed to improve the quality of its cars, to boost exports and to make Malaysia a hub for the automotive industry in the region. In 2012, following the takeover of Proton by DRB Hicom, the bigwigs, under the DRB-Hicom stewardship, again met with the minister on another restructuring plan to make Proton more competitive. But, the minister did not give in to Proton’s demands.

The minister stated that the National Automotive Policy (NAP) in 2009 had defined that Proton had to work with foreign partners to remain relevant in the competitive automotive industry. He stressed that Proton didn’t have high capital resources for Research and Development and the scale of R&D, since ’09 till present. Since Proton’s existence in 1983, a total of RM3.9 billion had been injected to sustain everything. At its peak in 1993, Proton’s domestic market share went up to as high 74 percent, but now fell to just about 15 percent. More recently in 2015, the ministry had provided an soft loan aid of RM100 million to Proton vendors.

The minister of International Trade and Industry (MITI), therefore, comes up with the following suggestions:

1. Proton is a relatively small player in the global context and thus not able to compete with other foreign companies unless it can substantially increase its exports.

2. Proton is suffering a problem of underutilization, about 35% of the available capacity in each of its two production plants is being utilized. The decision to have two plants is probably one of the mistakes made in the past by Proton.

3. About three years ago, Proton almost struck a deal with a renowned foreign player (VW, GM) but at the last minute decided not to proceed with the proposal. Had this collaboration been realized, we may have seen an improved performance by Proton in the subsequent years.

4. In view of the very serious nature of the problem, the Government believes that the current business model adopted by Proton is not sustainable. The Government has been seriously deliberating Proton’s request for assistance for grants and soft loans.

The Governmnt is expected to continue to assist Proton if the following requirements are met:

i. Proton needs to immediately identify a strategic foreign partner.

ii. The Company must be professionally managed.

iii. There must not be any interference in its business.

iv. Some tough but necessary measures must be put in place for the long-term sustainability of Proton.

Lastly, MITI expects the new chairman and bigwigs would assist towards enhancing the true potential of Proton and pave the way towards a better future for the company. The Government remains committed to ensure the continuous growth and development of the domestic automotive industry which would include the transformation of Proton and its ecosystem.

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