PROTON (COMPANY)

'Proton Holdings Berhad ' is the holding company for the Malaysian national carmaker 'Proton' (Malay acronym for ''Perusahaan Otomobil Nasional'', 'National Automobile Enterprise'), which was established in 1983 under the direction of the former Prime Minister, Tun Mahathir Mohamad. Proton is listed on the Bursa Malaysia.

Contents

History

Exports

Drop of sales

Strategic Partnership with Volkswagen AG

Stock acquisitions

Lotus

MV Agusta

Trivia

See also

References

External links

History

Based on technology and parts from Mitsubishi Motors, production of the first model, the Proton Saga began in September 1985 at its first manufacturing plant in Shah Alam, Selangor. Initially the components of the car were entirely manufactured by Mitsubishi but slowly local parts were being used as technologies were transferred and skills were gained. The 100,000th Proton Saga was produced in January 1989.^[1]
Until the end of the 1990s, the car's logo featured the crest from Malaysia's coat of arms, featuring a crescent and a fourteen-pointed star. The new Proton logo features a stylized tiger head.

In 1993, a model called Proton Wira was introduced based on the Mitsubishi Lancer/Colt. More than 220,000 units were sold between 1996 and 1998.^[2] Proton Perdana, based on the Mitsubishi Galant/Eterna, was first produced in 1995, intended for higher end market.
By 2002 Proton held a market share of over 60 per cent in Malaysia, which was reduced to barely 30 percent by 2005 and is expected to reduce further in 2008 when AFTA mandates reduce import tariffs to a maximum of 5%.
Proton Waja (Proton Impian in UK) is the first car model designed internally by Proton. It was launched in early 2001

With the acquisition of Lotus technologies in 1996 from ACBN Holdings (a company owned by the same person who owned Bugatti), Proton has gained an additional source of engineering and automotive expertise. This led to the production of Proton Gen-2 which was code name Wira Replacement Model (WRM) before the launch. The Gen-2 is the first of cars to be manufactured and assembled at the new manufacturing plant in Tanjung Malim, Perak which is part of Proton City development project. The plant was opened in 2004. On June 8, 2005 Proton introduced the second model to be manufactured in Tanjung Malim, the 1,200 cc 5-door supermini, the Proton Savvy. Both the Gen-2 and Savvy, were models that MG Rover was looking to rebadge when the British firm entered into collaboration talks with Proton. However these joint-venture talks were unsuccessful and MG Rover subsequently collapsed.

Exports

Proton exports cars to the United Kingdom, South Africa, and Australia and the company is aggressively marketing its cars in several other countries including the Middle East. Besides that, Proton cars has also been exporting a small volume of cars to Brunei, Indonesia, Nepal, Sri Lanka, Pakistan, Bangladesh, Taiwan , Cyprus and Mauritius. 14,706 Proton cars were exported in 2006.[1]
Recently Proton had returned to Guangdong, China after withdraw it due to a poor sales record in the past. In July 2007, Proton signed an agreement with Youngman Automobile Group Ltd. Co., paving the way for the national carmaker to offer its products and services in China. Under the agreements, Youngman will import 30,000 Gen.2 CBU (completely built-up) units and resell them under its own 'EuropeStar' brand and eventually develop a new range of Made-in-China cars with the engineering services provided through Proton's Lotus. Proton Holdings Bhd said this in a statement here.[2]
Proton began its exports from Malaysia to other right hand drive markets like New Zealand in the late 1980s, but its success was mostly limited to the United Kingdom where it entered the market in 1989. They advertised there with the slogan ''Japanese Technology, Malaysian Style'', Proton cars proved popular among budget-oriented motorists, and like Japanese and South Korean models before them, led to the demise of Eastern-bloc manufacturers such as Lada and Zastava. By the 1990s, Proton had withdrawn from the New Zealand market after offering only the Saga four-door and Persona five-door models. The Persona and Natura models were sold in Chile briefly during the late nineties by a local Nissan importer, but few were sold and the venture ended after two years.
Proton also exports cars to Singapore and Australia, and now produces models in left-hand drive, for export to continental Europe. An entry into the US market was considered by Malcolm Bricklin following Hyundai's successful launch in the mid 1980s. However, exports to the US never materialized, as the cars required hundreds of changes to meet American safety standards in order to secure coverage from auto insurers and satisfy legislative requirements. Proton export models still do not comply to all environmental standards such as emission limits.
The model that Malaysia has followed with the formation of Proton may be used as a case study for rent seeking as tariffs on imported cars rose almost immediately following the formation of Proton. Also AFTA agreements on relaxing entries into the ASEAN marketspace had exemptions specifically for Proton. The Malaysian government gained a three-year exemption for Proton from 2002 to 2005 where entry tariffs had to be lowered to 5%. This was replaced by other duties resulting in no net decrease in automotive prices for importers.
In the United Kingdom, Proton cars suffer somewhat from a poor public image. They are considered deeply unfashionable with younger drivers, they are identified as being a vehicle popular with elderly people.

Drop of sales

In 2006, Proton's sales dropped 30.4% from 166,118 in 2005 to 115,538 for the Malaysia market,[3]^[3] with a later report indicating a 55% fall of sales to 962.3 million ringgit, its lowest in at least seven years.^[4] This allowed Perodua to overtake Proton as the country's largest passenger carmaker for the first time, with a 41.6% market share, while Proton's market share fell from 40% in 2005 to 32% in 2006. In the period ending December 31, 2006, Proton has also suffered three consecutive quarterly losses. Compared to a profit of 86.5 million ringgit in 2005, the car company lost 281.5 million ringgit in 2006. Proton blamed discounts from rivals. Total losses in 2007's financial year climbed to $169 million.
The Employees Provident Fund (EPF) acquired an additional 830,000 shares in a transaction that spanned between January 5 and January 12, 2007.^[5]

Strategic Partnership with Volkswagen AG

In October 2004, Proton announced that an understanding has been reached with Volkswagen AG of Germany to establish a strategic partnership. Under the tie-up, the two carmakers are expected to exploit each other's strengths. Proton would gain access to Volkswagen's superior technical capabilities and technology. In return, Volkswagen may utilise Proton's spare capacity at the latter's Tanjung Malim to assemble cars for export to the South-East Asian market, where the German auto giant has a weak presence. Furthermore, the tie-up may see Volkswagen assist in distributing Proton vehicles in China while Proton does the same for Volkswagen in South-East Asia. Nonetheless, none of the parties announced detailed and concrete plans for the partnership. On January 13, 2006, Volkswagen announced that negotiation of the partnership has failed because VW's plans were different and clashes with the terms and condition that Proton offered. VW are more interested to own Proton Holding than a strategic partnership. ^[6] Despite this, Malaysian news has announced Volkswagen AG has signed an agreement to buy a 51% share in Proton on January 26, 2007. Official announcement from the two companies was expected February 8. 2007.^[7] The deal still has yet to be finalised as of June 2007. In June Datuk Seri Abdullah Ahmad Badawi has asked Proton Holdings Bhd to start talks with other carmakers on a partnership because Volkswagen AG is not interested. [4] Later on the Khazanah Malaysia Bhd, main share holder of Proton Holding said talks with Volkswagen AG still on.[5]

Stock acquisitions

Lotus

In 1996, Proton acquired a 63.75% share in Lotus Group International Limited for 40.64 Million Pounds Sterling. A later PriceWaterhouse Coopers audit would find that the CEO, Yahaya Ahmad, had inked the agreement on October 16, 1996. The agreement was presented to the board for approval on 27 November 1996. As part of the purchase agreement (signed prior to board agreement), there were restrictions placed on Proton's ownership of Lotus. One of the restrictions was a prohibition on diluting ACBN's remaining shareholding for a period of five years. This restricted Proton in its operation of the Lotus business and required Proton to guarantee a 40 million pound loan in 2000.

MV Agusta

In December 2004, Proton purchased a majority share in MV Agusta of Italy at 70 million Euro. MV Agusta is the manufacturer of MV Agusta, Husqvarna, and Cagiva motorcycles. A year later, Proton sold off its 57.7% share in MV Agusta to Italy's GEVI Spa for a token of 1 Euro. Due to heavy debt by MV Agusta, the selling enabled Proton to write off the losses off its book. But the buyer would assume the 107 million Euro ($174 million) in debt. In August 2007, GEVI Spa the company that bought over MV Agusta for 1 Euro sold the brand Husqvarna and its factory to BMW for a reported 93 millions euros leading to speculations by the Malaysian public of bad management of the company's board of directors.

Trivia

When the first Proton appeared on Malaysian roads, local wits promptly dubbed it (Proton Saga) the 'Potong Harga', meaning the 'cut-price' Proton. And for good reason. The Proton was at least 20 percent cheaper than non-national makes in the same 1.3 to 1.5 liter class. With both the price and a dash of national pride working for it, the Proton got a rapid hold on the market. By 1988 the Proton had overtaken all other makes and grabbed 73 per cent of the passenger car market.
In 1983, when the 'national car' had been planned, Malaysia was selling just over 90,000 cars a year and the market was growing annually by 20 per cent. The Proton plant was designed to turn out 80,000 units a year and could gear up to 120,000 units. But in Proton's first full year of production (1986), car sales took a severe dip to 47,000 and next year, due to the worsening economic situation, just 35,000. Only in 1988 did the market begin a recovery to 54,000 units, by now most of them Protons. Since then, the market has grown steadily to a 2005 peak of 417,000 cars. [6]
Government policy has kept the Proton cheaper than other makes by the simple strategy of taxing the competition, while giving Proton exemptions from these same taxes. Duties on packages of parts for assembly into complete cars in Malaysia is said to average about 150 per cent. Proton is exempted from most of these.[7]
It is interesting to watch what happens in January 2008 when a major ASEAN Free Trade Agreement (that Malaysia signed on to many years ago) which specifically bars discriminatory practice against goods considered "Made in ASEAN", comes into play. Cars (and CKD kits) made by the major world players (like Toyota) and considered "Made in ASEAN" (in practice, "Made in Thailand") would if taxed like a Proton, instantly become very price competitive with a Proton instead of costing 30 to 60 percent more, pre-2008.
The design of the car is over a decade old and has a dismal reputation for styling and safety. Moreover, Proton's reliability record is one of the worst of any car, according J.D. Power.

See also

★ List of Proton car models

★ List of automobile manufacturers

★ Lotus Cars

★ Team Lotus

References

★ "Malaysia auto plan seen as another wake-up call to Proton". ''Associated Press''.
----
1. The Proton Saga saga Todd, Halinah
2. Asia's Century on Wheels Sorabjee Hormazd, Paul Fisher & Chips Yap
3. 25/01: Malaysia's Proton loses top-selling spot for the first time Whitley, Angus
4. Proton Posts Loss as Sales Slump to Lowest in 7 Years (Update2) Whitley, Angus
5. EPF buys more shares in Proton AFX-Asia
6. VW's demands wreck deal with Proton Yong Soo Heong
7. Wait For Government's Announcement, Says Proton

External links

★ Company homepage

★ Proton Australia homepage

★ Proton UK homepage

★ Zagross Khodro - Proton Iran

★ Lotus Cars UK homepage

★ Proton News

★ GM Technical Partnership: A look at potential models, price positioning & competition