(Petaling Jaya, Thursday): The government must fully explain the 107% drop in Proton Holdings Bhd’s net profits resulting in RM 12.35 million in its first quarter ended June 30, 2005 as compared with a net profit of RM166.47 million in the previous corresponding quarter. Proton suffered a loss despite a 6.8% rise in revenue to RM2.05 billion from RM1.92 billion a year earlier caused by operating costs jumped by more than 20% to RM2.12 billion.

Such an explanation is necessary to avoid Proton’s net losses from adversely affecting the performance of the KLSE. Proton said on Aug 30 the loss was mainly due to higher allowances for doubtful debts of RM 137 million. The public has a right to know what Proton’s doubtful debts of RM 137 million are when car purchases are funded by banks and Proton would collect their money once the bank disburses the loan. Any failure to answer would only raise questions about the government’s commitment towards turning Government-linked corporations(GLCs) into global financial champions.

What is more worrying is the increase in inventories which indicate the increasing number of unsold vehicles by Proton. Proton’s inventories had risen 14% to RM1.10 billion as at June 30, 2005 from RM967.08 million on March 31, 2005. Inventories stood at RM821.90 million at the end of FY2004, RM835.5 million FY2003, RM720.2 million FY2002, RM881.7 million FY2001 and RM660.8 million in FY2000.

Proton’s latest model, Savvy had only bookings of some 3,000 units at mid-July, a month after its launch. In contrast, Perodua’s Myvi, got 33,000 bookings in less than a month after its launch. Proton’s market share has fallen to 40 per cent in the first half of 2005, from 43.5 per cent. With such a huge volume of unsold cars, Proton’s revenue can only fall and coupled with rising costs from steel and oil, operating costs can only increase, resulting in  higher net losses.

As Proton’s performance will have a bearing on the performance of the KLSE, the government has a responsibility to be transparent and accountable. The government must quickly announce the country’s national automotive policy to decide how public finances are to be spent to restore the public and investors’ confidence in our capital market. The government must remember that Proton’s cash holdings continue to fall with RM2.12 billion as at June 30 from RM2.45 billion on March 31, 2005, a drop of RM 1.67 billion in 2 years from its  peak of RM3.79 billion as at end-FY2003.

There must a quick replacement for chief executive Tan Sri Tengku Mahaleel Ariff who was terminated last month. Having a major company temporarily run by two joint chief operating officers is neither sensible nor rational. Neither does it builds confidence of the future direction of Proton. The government should get out of its mental trap of insisting that only Malays are qualified to head Proton. If there are any other non-Malay Malaysians who are qualified, then they should be appointed to quickly turn around Proton and prevent it from becoming another loss-making Perwaja scandal that will only drain public funds.