The End of Proton : Sooner or Later

More than 25 years liability to Malaysian
JUNE 2 – Proton Holdings Berhad, at group level, made a loss of RM338 million for the financial year ended 31.3.2009. That means, from April Fool’s day in 2008 till the eve of April Fool’s day this year, Proton lost RM338 million. The full report can be read at The Malaysian Insider.

Proton raked in a total of RM6.49 billion in that period. That is an increase of RM865 million over its took in for the previous financial year (2007/08). Although Proton had a lower turnover in 2007/08, it managed to post a profit of RM144 million in the same period.

Quite obviously, Proton’s operating costs have gone up in 2008/09 compared to 2007/08.
In addition, Proton sold more cars in 2008/09 than in 2007/08. In 2008/09, Proton sold 156,845 cars while in 2007/08, it only sold 139,952 cars.

Let’s crunch the numbers.

In 2007/08, Proton’s total earning was RM5.625 billion. It sold 139,952 cars. What that means is, Proton’s average earning per sale was RM40,192.35 (5,625,000,000 divided by 139,952). In that same period, Proton made a profit of RM144 million.

Which means, for every car sold, Proton made a profit of RM918.00 (144 million divided by 139,952). Therefore, in 2007/08, the break-even point for Proton was RM39,274.35 per sale (RM40,192.35 minus RM918.00).

In 2008/9, using the same methodology, Proton’s average earning per sale was RM41,378.00, representing an increase of RM1,186.00 than the average earning per sale in 2007/08. Proton however made a loss of RM338 million.

Which means, for every sale, Proton loss RM2,155.00. Proton’s break-even point had, in fact, risen to RM43,533.00, a rise in cost of a whopping RM4,259.00 per sale!

At this juncture, I must say that an average profit of RM918.00 per sale in 2007/8 was disappointing. In fact, “disappointing” is an understatement. Embarrassing is more like it.

And, for the average cost per sale to have risen by RM4,259.00 in the following year (2008/09) requires a lot of explaining.

The thing is, Proton is the darling of the Mahathir Government. It “darling” status continued under the Badawi administration. It is exempted from import duties in respect of its imported components.

That results in hundreds of millions of ringgit in revenue loss for the country. Consequently, it is us, the people, who are subsidising Proton.

In addition, the Government subsidises the production by giving grants and further exemptions.

To top it up, the Government protects Proton and its products by imposing high import duties on other imported cars. Approved permits are also required for imported cars just to protect Proton’s business. One AP costs about RM25,000 (there are instances where APs are sold at RM30,000!).

Ultimately, it is us, the people, who are paying all these hidden costs.

As a road user who does not buy a Proton, I am, in fact, subsidising Proton through the following:

a) the loss in revenue through exemptions from duties and taxes given to Proton

b) the grants given to Proton

c) the amount I have to pay for the AP for my imported car

d) the high import duties imposed on my imported cars

Added to that, the manhour costs which every Proton owner wastes in the workshop because of the frequent problems he or she encounters with his or her Proton. The time to get there. The time spent on waiting. The money spent on repairs (just bear in mind the famous Perdana gearbox problems and the famous power window problems in the Waja and Gen-2, for instance). The stress suffered in arguing with the Proton people.

All these are losses suffered by us, the people. All in the name of protecting Proton and pursuing a lost dream.

After almost 25 years, Proton makes an average RM918.00 profit in 2007/08 for every sale! Look at Honda. Within 20 years of the ubiquitous Honda Life, it managed to introduce a ground breaking Honda NSX with the now industry standard variable valve timing (V-tec) system.

Within 15 or 16 years of Honda Life, Honda was F1 champion, during the turbo days with its 1.5 litre engine! It was such a fast and capable car in F1, so much so that turbo engines had to be banned from F1 at the risk of Honda winning F1 championship non-stop for the next 15 years!

What has Proton won? The MME at Sepang? The Malaysian Super Series?

What ground-breaking technology has Proton managed to come out with in its 25 years? The truth is Proton can’t even build a trouble-free power window, let alone a ground-breaking gearbox or ECU.

The question is, then, what has gone wrong? Who is responsible for this auto debacle called Proton? Why is it not fixed? How long more are we, the people of Malaysia, are going to suffer losses, notional or otherwise, because of Proton? Why must we, the people of Malaysia, continue to assist Proton?

Various accounting-babbles were blurted by the Chairman in trying to explain the losses. Apparently, it was mainly due “to Proton’s decision for the impairment of PPE and inventory write-down for certain models impacted by volume contraction.”

Big words, indeed, Mr Chairman, Sir.

What it simply means is that Proton had to reduce the book value of some of its cars and plants. Why, you may ask? Well, it is because cars of these models cannot sell.

And, therefore, the plants or production lines for these models lost their book value. Why don’t the wise Chairman tell us what PPE had been impaired and which models have to be written down?

My guess is the Savvy. An absolute wonker of a car. “Your first Lotus”, as it was spun in Great Britain, to much ridicule by Top Gear (you can watch it on You-tube, where Clarkson made a hell of an embarrassing joke about that marketing spin!). Excuse me. The Savvy is my first Lotus? Good God! How about the Waja then. My first Lexus?

Which begs the question, who is to be held responsible for the impairment and write-downs? You don’t just impair or write down for fun. It was done for a reason. And the reason is the abject failure of the relevant model and consequently, the PPE in respect of that particular model.

Who was behind the model? Who was responsible for the design and production? Who was responsible for the marketing aspect of it? It was obvious that the Myvi killed the Savvy even before it was launched. It was a debacle. Now, are heads to roll because of this?

Well, you and I know the answer. No head is going to roll. Nobody is going to be held responsible, let alone, accountable.

That is precisely the malady which infests Proton. And that is part of the problems that beset it. Add to that a vendor system which is not transparent and is so full of mediocrity, below-industry-standard quality and probably, cronyism. All these contribute to this great Malaysian failure, Proton.