Should the government bail out Proton again?
Tajuddin Rosli, The Malaysian Insider
Perusahaan Otomobil Nasional (Proton) was established in 1983 and its first car was launched a good 30 years ago, in 1985.
The brainchild of Proton was none other than Tun Dr Mahathir Mohamad. Proton was used as a platform for Dr Mahathir’s dream to develop Malaysia into an industrial powerhouse.
Despite a no-go from his personal advisers, critics and common sense, Dr Mahathir went ahead establishing Proton.
Since its induction, Proton has always been a failing organisation and year in year out speculators predict the timing of its closure. Proton has been plummeting again and the question of whether the government should continue to bail Proton out has reemerged.
Should the government save Proton again?
Initially, Proton dominated the local industry with 60% of car sales. As late as 2001, it still dominated the local industry with sales of more than 50% compared to other international models.
However, in 2014, its sales dropped to 17% and have further reduced to about 15% during the first quarter of 2015. Currently, Perodua leads the local industry while Proton is second, barely above third placed Honda.
Has the quality of Proton dropped that the sales also drop drastically?
Personally, I don’t necessarily think so. Proton survived all the while under Dr Mahathir’s regime because the tax for imported cars was raised significantly, making them virtually unaffordable for the middle income group. Hence, people had no choice but to buy a Proton.
However, since Dr Mahathir resigned, the subsequent leaders reduced the strangle on imported cars and people were able to afford them. Prior to the 2013 general election, Barisan Nasional (BN) manifesto included progressive reduction on tax of important cars. It is estimated, imported car prices should reduce as much as 30% by 2018.
Proton is widely known as “milo tin quality” among the people and word on the ground is that “if you want to be safe on the road, do not purchase a Proton”.
Although Dr Mahathir would tell you that Proton is probably safer than a Volvo or Merc, we all know the truth. Dr Mahathir has a problem with grandiosity and the entire nation knows that.
Proton has been sluggish all the while. With the sales of Proton being at an all-time low, it is speculated that the government needs to pump in about RM1.5 to 2 billion to save it from shutting down. Although Dr Mahathir will continue to say Proton needs no bail-out, it does not curtain the truth of Proton’s true suffering.
In March 2000, under the premiership of Dr Mahathir, Petronas hit the headlines (as it has numerous times) when it sealed a deal of about RM1 billion to purchase 27% of Proton shares, making it the controlling shareholder. The stake was held by DRB-Hicom Group Bhd, which was deeply in debt. This came about after Proton reported a loss of RM19 million over a period of nine months in 1999.
Very often we hear people questioning our petrol price since we are one of the top petrol producing nations. All kinds of excuses have been cited, some of which makes absolutely no sense.
Let the truth be told. The fact is we are paying a hefty price for petrol despite being one of the front runners in petrol production globally because Dr Mahathir exhausted billions of Petronas funds and money is still being siphoned out from Petronas.
In the early 1980s, Petronas received a lot of criticism for injecting huge amounts of money to bail out debt-ridden and politically affiliated Bank Bumiputra.
In 1998, the entire nation wept as Dr Mahathir spearheaded Petronas to bail out Konsortium Perkapalan Berhad (KPB), a public-listed company belonging to his son, Mirzan. It was estimated KPB floundered debts around RM 1.7 billion.
Under the Dr Mahathir regime, Petronas was used to finance the Petronas Twin Towers and development of the country’s administrative capital, Putrajaya.
Through Putrajaya Holdings (of which Petronas is one of the shareholders), it was also involved in landmark projects like Putra Square, Putra Mosque, Putra Bridge, Putrajaya Lake and Wetlands.
