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Abdullah Badawi’s wavering uncertainty over the future fate of Proton may be the symbol of failure in his Prime Ministership of indecision and lack of courage in taking painful choices in the national interests and fiscal prudence


Press Statement

by Lim Guan Eng



(Petaling Jaya, Friday): Prime Minister Datuk Seri Abdullah Ahmad Badawi’s wavering uncertainty over the future fate of Proton Holdings Bhd (Proton) is so embarrassing to watch that Proton may the symbol of failure in his Prime Ministership of indecision and lack of courage in taking painful steps in the national interests and fiscal prudence. A final decision is overdue on Proton which continues to lose money, cash reserves and market share. 

Such unchecked bleeding can be seen in Proton’s failure to meet its key performance indicators (KPIs) for the fiscal year ended March 31 (FY07) as revenue dropped 37% to RM4.9 billion from RM7.8 billion in FY06. Proton incurred a net loss of RM591.4mil against a profit of RM 46.7 million previously. Its cash on hand fell 34 % to RM 461 million. 

What is more worrying is that sales fell 40% from 183,824 units to 110,358 units last year, a drop in market share to 32 per cent from more than 60 per cent in 2000.  How can Proton expect to survive with such poor sales when its overseas market is a loss-making operation? 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 when previous loss-making government linked corporations such as MAS are recording profit growth. 

Proton has carried out numerous rationalisation exercises to enhance operational efficiency, cost competitiveness and value to customers, to no avail. This included Proton seeking RM 26 million from the government to carry out its consolidation exercise by offering "relief assistance" to its car dealers to close their Proton dealerships.  

Proton is also holding discussions with other international automotive car makers such as General Motors (GM) as Volkswagen AG (VW) to seek a strategic and technological partner to rescue and salvage its perilous financial position. The lack of exciting and saleable new models and Proton’s intention to downsize its network of dealers nationwide by 20 per cent from 293 in March to 227 by year-end has clearly marked out Proton to be a “sunset” business.

Two deadlines imposed by the government on such talks with foreign strategic partners have passed but no deal has been reached. Instead of making a decision, Proton has made a mockery of these deadlines by continuing such discussions with GM and VW and now no deadline has been set to conclude the foreign strategic alliance for Proton.

Even the Prime Minister seems confused about the direction of such discussions when his announcement that talks with Volkswagen had ended was contradicted by Khazanah Nasional Bhd, which has a 42.74 percent stake Proton. Khazanah Nasional managing director Datuk Azman Mokhtar said that VW continued to have talks with Khazanah,

Such confusion does not inspire confidence amongst foreign investor, financiers, customers and the public about the future viability of Proton. The government has to make a quick decision and can not hold discussions for ever with GM and VW without coming to a decision.

How much is the public going to pay to sustain Proton’s losses apart from the losses suffered from paying higher prices for all new cars in Malaysia, (including Proton which is more expensive here than that sold in London) as compared to those sold in neighbouring countries? Any delay will only cost money and Abdullah must decide that if there are no strategic alliances, then he may have to put aside nationalistic sentiment and consider selling Proton to the highest bidder.



* Lim Guan Eng, Secretary-General of DAP

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