Proton logoA few stories that have appeared in the press recently gives an impression of an uncertain future for Proton, especially its management. First we learn that Proton’s current managing director Datuk Syed Zainal Abidin Syed Mohamed Tahir contract is expiring at the end of this year, and talks to renew that contract have not yet begin.

Datuk Syed Zainal’s leadership has been considered by many as key to Proton’s recent relatively better performance, so this has caused some concern with investors. We as consumers are also naturally concerned as let’s face it – Protons and Peroduas are the only cars to consider for many of us, and for those who need the larger luggage space of a booted sedan, that choice is narrowed down to only Protons if you don’t want a used car. If Proton does badly, you can be sure that the Protons are going to be rolling out from Shah Alam and Tanjung Malim are going to be relatively worse, and I don’t just mean in terms of QC; which could happen as the result of disgruntled assembly line workers that are not paid enough. Not enough funds for R&D could also result in the second generation Proton Saga having a product lifespan as long as the first one.

StarBiz reported earlier this month quoting unnamed sources that the relationship between Proton’s executive management and its majority shareholder Khazanah Nasional had soured after Proton had convinced the cabinet to allow Proton to turn itself around on its own, while Khazanah was ready to go ahead with a an equity transfer partnership with the Volkswagen Group.

“In our view, Proton needs to basically integrate more into the global supply chain and the global market. Basically, we have not attained the kind of export penetration projected when the company was established. The global motor vehicle industry was undergoing a consolidation and Proton should be part of this trend. When Proton started 25 years ago, there were about 60 car manufacturers in the world. Now, there are 15 and in time this number may shrink to just half. So, you really have to recognise the industry’s consolidation. Size matters, and so do economy of scale. We need to be part of the bigger family in a way that works for us. Proton Holdings Bhd should continue to seek strategic alliances and further expand its market globally, and when we say alliances, we refer to those which may typically include equity ownership and partnership,” said Khazanah’s managing director Tan Sri Azman Mokhtar to Bernama yesterday.

We do not know what exactly was in the presentation that convinced the government to do a flip flop with its decision to partner Proton up with a foreign technical partner, but it seems like Khazanah is not very happy with how things are going now. Could Proton have promised more than it could deliver? This may have put Syed Zainal in Khazanah’s bad books, but I say if that is true, give the man more time to finish what he started!

He is already taking the company towards technical partnerships for low volume products, with in-house developed products to be limited only to those a few core models that are expected make up the majority of Proton’s sales volume. Core models would be between three to five models, and the first three will be the Proton Persona, the Proton Saga and an upcoming MPV due in 2009. The other two models would be unveiled later, or may not come to existence at all. Core platforms will be limited to two, with all models to be based on a modifications of these two core platforms. Small volume models will be done on a collaboration basis.

A new Perdana based on the Australian Mitsubishi Galant is possible if a smaller engine can be shoehorned into the car, but what is more likely is a car based on something readily-available with small engines such as a Mitsubishi Lancer with a toned down, less aggressive design much like what Mitsubishi Taiwan took with the Taiwanese Mitsubishi Lancer Fortis. After all, the current Perdana’s 2,635mm wheelbase is equal to the new generation Lancer’s 2,635mm wheelbase, and the Lancer is called a Galant in the Japanese market, so in terms of size it is somewhat viable.

In any case, any negotiations for partnerships involving taking up equity in Proton should not be too biased towards the foreign party now since Proton’s financial books are in a better condition now.

Take a walk back in time:
Proton-Volkswagen partnership: no go!
Proton-Volkswagen talks are OFF!
Why the Proton-Volkswagen partnership was a no-go: the inside scoop