Press Statement

by Lim Guan Eng

(Petaling Jaya, Wednesday): DAP is shocked by Proton Holdings Bhd's announcement of a net loss of RM281.46 million for its third quarter (3Q) to Dec 31, 2006 against a net profit of RM86.51 million a year ago. What is more shocking is that revenue fell 55% to RM962.27 million in 3Q from RM2.15 billion in the previous corresponding period.

Clearly Proton is facing a severe crisis where there is no prospect for turnaround in a difficult and extremely competitive industry where the risk potential for huge losses is greater than profits. Whilst the net loss of RM 281.46 million in 3Q as compared to a net profit of RM 86.51 million last year can still be absorbed, the 55% drop in revenue marks a point of no return that may sound the death-knell of Proton. Such a steep loss in market share is almost irretrievable.

Instead of self-delusions or any illusions drawn by the company's management, Proton is basically a sunset company unable to compete not only against global manufacturing automotive giants but also local ones such as Perodua. Proton should seriously consider either selling, inviting foreign participation or even close down if it continues making huge losses and face 55% drop in revenues such as the third quarter financial results when all other government linked corporations such as MAS are recording profit growth.

For the nine-month period this year, the company's net loss jumped to RM590.45 million from the RM80.17 million in the previous corresponding period on a 39.2% drop in revenue to RM3.66 billion from RM6.01 billion previously. As a result, the group registered a loss before tax of RM608.2 million for the current financial period compared to a loss before tax of RM72.9 million in the corresponding period last year.

Compare such dismal performances with other GLCs such as PLUS Expressways Bhd which registered a net profit of RM300 million for the quarter ended December 31 2006, better than the RM215.98 million recorded in previous period last year. For the overall financial year, helped by high toll collection, the group's net profit was higher at RM1.1 billion compared with RM1.06 billion it recorded in 2006.

Even MAS, seen as an epitome of everything that is wrong with loss-making GLCs of billion ringgit losses, has made a remarkable turnaround. For the quarter that ended on Dec 31, 2006, MAS recorded its second consecutive quarterly net profit of RM122.04 million. MAS aims to make as much as RM700 million in net profit in the year to Dec 31, 2007. In contrast, Proton is only hoping to stem losses not make profits.

In such desperate situations, Proton should stop drawing illusions of profit to prevent the inevitable. There is no point throwing good money after bad and Proton has to admit that its engineering capability and car models are just not good enough. The public should no longer be burdened with hundred million ringgit losses or else they will only worsen to billion ringgit losses. Drastic measures must be taken and even changes in management may be too late to save Proton. What is more important is to save Malaysians from facing huge losses sustained by Proton just to save the face of the government wanting to fly the flag that Malaysia has a locally produced car.