Proton’s never ending problems
With the Government owning 79% of Proton, the haemorrhage will continue unless the Government, the controlling shareholder makes some drastic changes to the current existing system of producing cars.
Koon Yew Yin, Free Malaysia Today
All Malaysian taxpayers must have been shocked to read the article “Proton to raise capital” , car maker issuing Rm 1.25 billion convertible preference shares to Government, on page 3 of The Star on 7th June 2016. Proton is a 100% unit of DRB-Hicom. When the redeemable convertible cumulative preference shares (RCCPS) is exercised into shares, the Government will end up with a 79% stake in Proton and DRB-Hicom’s shareholdings will be diluted from 100% to about 21%.
DRB-Hicom yesterday said the Government had agreed to subscribe to 1.25 billion RCCPS issued by Proton via GOVCO Holdings Bhd by way of a RM 1.25 cash payment.
Proton has been experiencing flagging vehicle sales in recent years and this has affected its cash flow position. Proton plays a crucial role in the national automobile industry where there are about 12,000 workers directly under it while about 50,000 are employed under various vendor companies.
The founding of Proton National Bhd. in1983 was an expensive mistake to begin with. Billions of ringgit from taxpayers have been lost in the process. Moreover, to encourage people to buy Proton, the Government increased the import duty for other cars and car parts. As a result, consumers suffered. For over 30 years we have had to pay higher prices for all cars including Proton. Even this has not been sufficient to save Proton which has been sold five times already.
Now with the Government owning 79% of Proton, the haemorrhage will continue unless the Government, the controlling shareholder makes some drastic changes to the current system of producing cars.
- From the report, the Government representatives will come from the Ministries of Finance, Industry and Economic Planning Unit. I suggest some old Directors should be removed to be replaced by these Government representatives.
- It is also essential to remove a few of the top managers and replace them with new people with the necessary experience.
- The new management must see how to measure the efficiency of the 12,000 workers directly under the company. One way is to compare the labour cost of producing a similar car in Japan or compare it with Perodua which has been profitable since its inception in 1992.
- The new management must also see how the company buys parts from the vendors who are employing about 50,000 workers? Is the company obliged to buy parts from these vendors? Can the company call for quotations for the supply of parts from the open market?
- Proton should copy the way Perodua manufactures its cars. I understand that the Japanese have full management control of the car manufacturing process, although they are minority shareholders.
Malaysians are now wondering – will the burden on taxpayers and car owners be continued in other new ways?
