Can Arul go and save Proton now?
LSS Report
There is little doubt now that Proton is in crisis.
Proton’s domestic market share in Malaysia has dropped from as high as 74% to a mere 15% last year. While exports have slumped to negligible levels. The year before Mahathir became Chairman, it was 21%.
In 2001, Proton sold as many as 215,000 cars but this has dropped to 158,657 units in 2011 and just 102,175 cars last year – although the size of Malaysia’s car market has grown a few multiples.
Sales continue to drop this year with the Jan 2016 sales of only 7,743 cars compared to 8,900 last year and 15,806 in Jan 2012.
Sales for Feb 2016 showed further drops with 5,947 cars compared to 8,254 last Feb, 11,459 in 2013 and 11,559 in 2012.
In 2011, Proton had reserves of RM4.8 billion, but as at Mar 2015, this dropped to RM1.8 billion due to losses every year since DRB-Hicom took over.
Proton’s financial year-end is March, and for FY 2015, Proton booked losses of RM646 million (same amount as 1MDB lost in FY 2014 and they even share the same auditors too!).
Mahathir resigned as Chairman and advisor just as Proton was closing its financial year-end March 2016 where it is likely that losses will be more than RM1 billion due to much lower car sales.
Such a loss could wipe out most of Proton’s remaining capital and also put the entire DRB-Hicom group at risk.
Suppliers to Proton are already facing difficulties in getting payment from Proton.
Proton now has 30,000 unsold cars idling and had even tried to get suppliers to accept cars as payment, which they refused of course.
A few days ago, MITI minister Mustapa Mohamed issued a warning saying that that Proton is in trouble and revealed that MITI had given RM100 million emergency loans to Proton suppliers last year.
Mustapa also revealed that Proton had requested for an immediate free grant of RM1.5 billion from the govt to save it. This would be on top of the RM14 billion assistance that the govt had given Proton over the years.
Regardless, the govt now has a tough decision to make: Provide a further RM1.5 billion of public funds immediately to save a private company with no guarantee that losses will stop. Or allow Proton and their suppliers to bungkus along with up to 60,000 jobs.
What should govt do?
It looks like Mahathir has washed his hands off Proton at its weakest point and on the verge of collapse – which could even collapse the DRB Hicom group.
When the Mar 2016 financial results are announced, we will know the true scale of Proton’s problems and whether it has reached technically bankrupt status.
Strangely, the entire period 2014 and 2015 that Mahathir was attacking Najib for 1MDB losing money, Proton itself could have lost RM2 billion!
It is ironic that when 1MDB’s rationalisation is complete and is profitable again, the problem have now shifted to Mahathir’s Proton.
Perhaps the govt should transfer Arul Kanda from 1MDB to Proton to help restructure it too.
