so far dont know yet but they say proton must move on by having new models on their own and not rebadge, which i think their mitsu business affected by it since under DRB right?
Thursday January 19, 2012

Major overhaul at Proton needed
MAKING A POINT
By JAGDEV SINGH SIDHU



WHEN Datuk Seri Mohd Khamil Jamil addressed the media on DRB-Hicom Bhd's takeover of Proton Holdings Bhd yesterday, the managing director of DRB-Hicom was coy about the details and clarity of his plans for Proton.

All Khamil could disclose was a generalised vision and action plan as DRB-Hicom has not formalised its takeover of Proton. Furthermore, he does not want to let Proton's competitors know just what it has up its sleeves.

But he did say enough to let people know there is a lot of work ahead for the automotive-centred company.

DRB-Hicom should pay a tad over RM3bil to buy and privatise Proton and is making its offer without the benefit of a due diligence.

The absence of checking the books and operations of the company before making an offer should guarantee a consternation or two for DRB-Hicom, which has already signalled its surprise over how decisions are made at key subsidiary Lotus.

He revealed that a sale of Lotus would be considered but it would want to hear firsthand just how its turnaround plan is proceeding. DRB-Hicom will want to gauge for itself whether that plan has a chance of making Lotus profitable.

As it stands, the Lotus gamble is costly. Lotus is seeking to spend £480mil (RM2.3bil) over 10 years to make itself a success and will start with an ambitious launch of five cars. Khamil said that was a huge amount of money for a turnaround and DRB-Hicom was keeping its options over Lotus open at the moment.

But the focus will be on what Proton was set up to do and that is to build cars everyday people can afford to buy. Proton has been doing just that for years and unfortunately, without the protection it receives, it is not very good at that.

In a market such as Singapore where taxes are high but uniformed within the category of cars, just 75 Protons were registered in 2011. It does not help when the Honda City and Toyota Vios two cars the Proton Saga goes against are cheaper there.

That explains why export sales have been disappointing for years and that is something DRB-Hicom will need to rectify fast. It wants Proton to move away from rebadging cars to making their own vehicles but that will take a lot of money and is something for the long term.

But first, it needs to cut costs fast and improve efficiency. It should be able to do that through improving its supply chain and amalgamating the distribution network to where dealers will be preferred over branches. It also must cut the wastage at Proton where previous owners have struggled to do.

Any money saved from that would help as Proton's manufacturing business reported an operating profit of RM146.2mil for its latest second quarter but unit Lotus, which is incurring costs in its turnaround plan, reported a loss of RM130mil. Proton made a net profit of RM15.6mil for the quarter and that kind of quarterly returns is paltry for a company that costs over RM3bil to buy.

Time might not be on their side as the winds of deregulation are before us. Protectionism will slowly be unwound and DRB-Hicom will need to be quick when it refreshes Proton's vehicle rollout plan. An update on the National Automotive Policy should give more insight on the timelines Proton and the local industry is looking at.

But it is only through higher competition will Proton improve itself and by having better cars can it then hope to grow its export market.

What Malaysians want is a Proton that offers good value and is technologically and aesthetically up to date. If the South Korean cars can do just that against the Japanese cars, then DRB-Hicom should strive to do just that and fight in that market.

Better cars will improve the perception and branding of Proton. Should Malaysians become richer from the various transformation programmes, then people will be able to afford the better cars and might not want to look at a Proton anymore if the quality of the car does not improve.

The management of DRB-Hicom will have the luxury of seeing just how best practices are being adhered to by observing how Mercedes-Benz, Volkswagen and the other makes are assembled at its Pekan plant. They can use that knowledge to improve Proton.

Its relationship with such blue-chip principals might lead to a strategic alliance and that will be important in getting the latest technology and engines for Proton.

Deputy news editor Jagdev Singh Sidhu feels Proton should be a source of pride instead of a burden for the public.