Goodbye ACCORD, Hello PERDANA!

The Honda Accord 2012 will be phased-out and will reemerge as the new Proton Perdana

Apparently, PROTON intends to replace the Perdana with an interim model, pending the new Perdana targeted for launch in 2016. Thus PROTON will, in early 2014, introduce a rebadged 2012 (late model) Honda Accord, which is being phased out/discontinued and this model will be branded as the Perdana, exclusively for government use. In the interim, until 2016, PROTON will supply about 400 units of the faux Perdana to the Federal Government this year and 3,000 units in total by 2015.

The Pink Panther

Is it unfair business practice to substitute an inferior or lower-quality product for what was promised according to a prior business arrangement?

Common sense would tell you yes, it is, whether we are judging by man’s intrinsic moral code and especially spiritual and Islamic ethics. But this is exactly what is playing out now in what I’m going to refer to as PROTON versus Public Servants.

To cut a long story short, PROTON under an existing 25-year concession is to supply a new Perdana and Perdana Executive model every five years to the Federal Government. These cars are part of the perquisites for government senior officers including Ministers and Deputy Ministers.

Since the Perdana was discontinued in 2008, a new model should have been launched in 2013. However, it was recently reported that the Perdana and Perdana Executive would be replaced with the 2013 Honda Accord 2.4 litre model, as approved by the Cabinet. The replacement is being proposed because PROTON is yet to bring a new Perdana model to market. On the surface, there appears to be no problem, since officials would still benefit by getting a comparable current model executive sedan.

However, these plans look likely to be scuttled by PROTON itself. Apparently, PROTON intends to replace the Perdana with an interim model, pending the new Perdana targeted for launch in 2016. Thus PROTON will, in early 2014, introduce a rebadged 2012 (late model) Honda Accord, which is being phased out/discontinued and this model will be branded as the Perdana, exclusively for government use. In the interim until 2016, PROTON will supply about 400 units of the faux Perdana to the Federal Government this year and 3,000 units in total by 2015. To add insult to injury, PROTON intends to charge the Federal Government for the rebadged 2012 Accord at prices above current market value.

Thus, the Government and civil servants will not benefit from or enjoy the usage of the latest models in the motor industry, but will use what is effectively a 2012 phased-out model for the next three years. This is reminiscent of the situation where PROTON continued to supply the Perdana – which was discontinued in 2008 – to the Government until recently. Essentially, the Government – ultimately meaning the taxpayer and the public – are and will continue to be overcharged for an obsolete product. 

Now, you might ask why the Government isn’t eliminating the middleman (PROTON) by going straight to the manufacturer (HONDA) and bargaining for bulk rates on the latest Accord models. The answer lies in the ownership structure of PROTON and Honda. Since both Honda and PROTON are controlled by DRB-HICOM, it is understandable that it has been emphatically stressed that Honda will not supply the new 2013 Accord model direct to the Government as all Honda sales to the Government will be channeled through PROTON. In substance, doesn’t it look as though PROTON is essentially monopolising the market, dictating prices and manipulating market behaviour?  Is this aligned with best practices promoting a competitive and open marketplace which benefits consumers and end-users? Are consumers’ rights being infringed upon making this a matter for regulators enforcing the Competition Act 2010?

Drilling deeper, this issue is also symptomatic of the endemic rot plaguing Malaysia. What are the signals being sent out by PROTON’s management and board in their guise as business leaders and guardians of integrity and good governance? One, that there is a paucity of innovation, creativity, vision and strategic thinking in a company lauded as Malaysia’s flagbearer in the global automotive industry and tasked as a driver for heavy manufacturing. How does rebadging a Honda model – albeit to augment its ageing product lineup – contribute to PROTON and Malaysia’s innovation efforts? Why delay bringing a new Perdana model to market only in 2016? 

Two, has PROTON reneged on the interests of its investors and stakeholders by resorting to rebadging? DRB-Hicom Group Managing Director Tan Sri Dato’ Sri Haji Mohd Khamil Jamil reportedly told media in March 2012 in a reference to the rebadging of the Vollkswagen Polo that: “Rebadging was never in our plans. If we want to develop the national auto industry, we have got to move forward. Rebadging is taking a step backwards.” He added that “I may have to eat my words someday, but as long as I’m in charge, I will never allow that (rebadging) to happen.” How then do you account for the rebadging exercise? Investors (especially minority shareholders) and stakeholders deserve to know why PROTON is backtracking as well as the risks and prospects involved. 

Three, isn’t substituting a lower-quality product instead of the product originally agreed AND charging a price above market value a form of oppression and unfair business practice? By providing the Government and civil servants eligible for a new Perdana or 2013 Accord with a discontinued Accord for a higher price, isn’t PROTON essentially shortchanging them as well as the public funding these purchases? Is PROTON demonstrating concern for its stakeholders, especially consumers and the public? How are unfair business practices such as these aligned with Malaysia’s desire to build a reputation as a world-class investment destination? Does such behaviour give investors confidence?

Four, why is the Government continuing to kowtow to PROTON and Honda – in other words, DRB-Hicom – instead of sourcing other suppliers? The Toyota Camry 2013 edition, to name another option, is priced the same as the 2012 Accord. Why continue to subsidise Bumiputera-controlled businesses if they are unable to stand on their own two feet in a supposedly free market?

In this millennia where communication is king and the Internet records stupidity for posterity, brands and reputations can be tarnished by the arrogance of silence. Can PROTON afford to disregard reputational issues, which will affect its goodwill and brand? Please, PROTON, explain your actions and decisions to all the relevant parties, especially the affected Malaysian civil servants. An apology, along with accountability, would be welcome. The Cabinet too is well-advised to correct its stance vis-à-vis PROTON in favour of upholding consumer rights and saving public monies before public perception damns the Malaysian government as one that bends the rules for monopolistic big business, endorses unfair business practices and rides roughshod over the rights of the civil servant and the public interest. If we want Malaysia to evolve into a mature developed economy, we can no longer afford to ignore the elephant in the room and sweep things under an increasingly bulging carpet.