Saturday, 16 February 2013



IT’S INTERESTING that former Prime Minister Mahathir Mohamad should reveal at this juncture, as Proton Advisor, that the privatized national car maker is putting the finishing touches to a turnaround plan. This man has an infinite capacity to continue spewing sheer nonsense in economics.

The forthcoming 13th General Election no doubt figures prominently in the so-called turnaround plan. The idea is designed to make the embattled Barisan Nasional Government and the national car concept suddenly look attractive.

If Proton has a genuine turnaround plan, it must mean that the market distorting parasitic vendors and suppliers a la Bumiputeraism will be phased out to open up the market to competition. This will never happen as this community continues to leech off the car owners unfortunate enough to own a Proton and need spare parts and service. Opportunities, the politics dictate, are to be hogged.
The turnaround plan must also mean that there will be greater diversity in its workforce. Again, it’s a non-starter, given the politics of “creating and keeping the jobs for our community alone”.

For another, turnaround must pledge that Proton will somehow conjure up a new series of engines and not through sheer magic. The engine, the core of what car-manufacturing is all about, is the national car maker’s Achilles heel. It has no R&D facilities worth speaking about, no world-class engineers, and all this despite Government promises of continued financial and other support in this area.

This leaves the so-called national car maker dependent on continued hand-outs from the tax-payer despite having gone private and Government protection to ensure that its market share of 50 per cent along with Perodua doesn’t shrink even further.

There’s a limit to how much the Government can help protect Proton’s market share. Foreign makes are likely to make further inroads into the domestic market, given their economies of scale and the newly-found tendency among Proton-allergic Malaysians to fork out ever-increasing amounts to get a foreign car model which will be worth their investment.

The thrust of the turnaround plan is to boost Proton’s image by ditching the idea that cheap is the way to go. Nothing is being said here about value for money and being competitive. Obviously, bringing in a German associate company not so long ago to help with quality control is not working either.

Mahathir thinks in a contradiction in terms that producing more expensive versions, as part of the turnaround plan, will help pull Proton through and put it on the road to viability and sustainability. This hare-brained approach based on a simplistic notion fails to take into account the fact that it was a combination of Government protection, infusion of tons of money from the tax-payer and Petronas, and cheap pricing that in the first place initially won it the lion’s share of the domestic market. That market share is now in grave peril as it’s set to shrink year by year.

The national car project, to rub salt into the wounds, does not enjoy the kind of economies of scale that has helped world number one Toyota for example to take the world by storm. It’s said that no car manufacturer can be in the game for the long-haul unless production exceeds one million units a year, a new engine model is turned out every three years, and one has a share of the world export market.

This is where Proton completely falls apart on all counts.

Proton is congenitally incapable of raising production levels and even if could, it will not be able to sell the number unless the export market has no qualms about coming to the rescue of an uncompetitive and long outdated engine model. 

Clearly, Proton thanks to Mahathir during his long innings in power has painted itself into a corner and there’s no way out.

This is the end result of thinking like a communist – read Mahathir -- when it comes to economics and the market.

Communism has proven that the idea of a national anything is a non-starter and it’s anybody’s guess why Malaysia chose that path under Mahathir. Ignorance is bliss, a little knowledge is dangerous, and the politics of race obviously had a lot to do with it. The Proton idea appears to have been hatched by a jaguh kampung over a teh tarik at a mamak stall: “If Japan can produce cars, why can’t we? etc etc . . . Malaysia Boleh!”

It’s a certainty that the Proton idea would be killed in any change of Government in Putrajaya, and with good reasons. The future of the automobile industry is in India and China, a fact already recognised by global manufacturers in Japan, Korea and the West who are flocking to the two Asian giants. Proton cannot emulate the established car manufacturers to live and fight another day simply it has no standing whatsoever in the industry.

Hence, any new Government will be foolish to fork out even a sen to the ailing national car maker and this will suddenly make the future all the more dangerous for it.

If the carpet is pulled out from under the feet of vendors and suppliers, spares will suddenly dry up and car owners will ditch their vehicles in a panic. The bottom will fall out from the market. It’s not clear to what extent the slack can be taken up by spares available from Japan and Taiwan.

Proton cannot continue to be an ego game at the expense of long-suffering Malaysians, especially car owners.

It was not so long ago that Proton started at the same time as Hyundai of Korea. Hyundai has gone on to achieve global recognition and ranking. Proton remains a manufacturer struggling still very much at the kampung level.

If there’s one thing that has done Proton in, it’s taking Mahathir’s advice on car manufacturing when he’s no subject matter expert. If Mahathir reads widely and everything, as his apologists claim, he should have realized this ages ago.

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