MITI gives Proton ultimatum – adapt or go bust

On April Fools’, the Ministry of International Trade and Industry (MITI) released a rather solemn statement to Malaysia’s struggling car manufacturer, Proton, and told them that their business model is unsustainable.

MITI’s Minister Datuk Seri Mustapa Mohamed went as far as to say that Proton, during their best years, used to do so well that seven out of 10 cars sold were Protons. Currently, the company’s market share dwindled to a mere 15 percent, and only 35 percent of their production plant (both plants combined) are utilised. To add salt to injury, the government admitted that Perodua is in fact doing a better job.2014 Proton Iriz 1.3 Executive & 2014 Proton Iriz 1.6 Premium compared

MITI is also seriously deliberating whether to pull the plug on Proton, seeing how dependent the company is on government funds. It’s not that the government can’t provide assistance; they can, with conditions of course. Let us share with you our opinions on the conditions Proton has to meet.

i. Proton needs to immediately identify a strategic foreign partner

While Perodua’s plant has been sustainable and profitable thanks to Daihatsu and Toyota, it proves that unless you consolidate with larger manufacturers like Toyota, Volkswagen and GM, there chance of survival rests solely on quality of product (like Mazda and Subaru). Right now, the only brand under Proton’s fairly small umbrella is Group Lotus, and even those niche products can’t help much in making the grass greener.

Source: Nellagam
This could be a future Proton model

Proton isn’t spared from such opportunities in forming a strategic partnership. Volkswagen for example, approached them, and was rejected. Twice. Proton’s most recent partnership is with Suzuki, and there could be a rebadged Suzuki MPV somewhere in the pipeline. Hence, this vague condition does raise a question: is the government not convinced of this partnership with Suzuki? Do they want a more secure, larger foreign brand like Volkswagen instead?

ii. The company must be professionally managed

Proton has been under the stewardship of DRB-Hicom since 2012, but input came mostly from the conglomerate’s auto division. Apart from being professionally managed, Proton needs a true leader to inspire. For that, I personally can’t think of anyone better than Datuk Syed Zainal Abidin Syed Mohamed Tahir, Proton’s CEO from 2006 to 2012.

The former Perodua head transformed Proton by producing profit-making models such as the Persona, Exora and Saga. Datuk Syed Zainal was well respected and loved by his staff, so that’s one reason why we think the company was at its best during his six-year tenure.

iii. There must not be any interferences in its business

There’s no doubt that former Malaysian Prime Minister Tun Dr Mahathir Mohamad played a pivotal role in building Proton. Tun Mahathir’s shocking resignation as Chairman of Proton means that the company will no longer be at the mercy of his political involvement, but just so you know, he has also relinquished his political position, as well as the Chairmanship of Group Lotus.2015-Mahathir-Visits-Lotus-Plant-Hethel-01

Tun Dr Mahathir was never open to the idea of selling Proton to a foreign brand, but with him officially out of Proton, they might just allocate some shares for bigger car manufacturers to step in.

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

When a company faces challenging economic times, drastic and unpopular measures must be exercised in order to ensure survival. Take for instance Malaysia Airlines Berhad (MAS). After decades of financial struggle and two catastrophic tragedies occurring in 2014, the company had to sack 6,000 employees, and all existing agreements had to be reviewed by its new foreign CEO.2015-Mahathir-Visits-Lotus-Plant-Hethel-02

But personally, I feel that it’s time for Proton to let go of the struggling Group Lotus. This is assuming that Proton’s engineers may have already benefited in full from Lotus’ expertise in handling dynamics. Whether they realise this or not, what Group Lotus needs is exactly what Proton needs – a strong foreign owner. Surely, Proton will able to reduce its expenditure by not having Group Lotus under its belt.

Proton turns 31 this year, and they’re caught right in the middle of a crossroad. Just how will Proton rebound from this? Let us know what you think in the comments section below.

Disclaimer: The opinions expressed in this article are that of the author’s. They do not purport to reflect the opinions or views of and its members.


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