The National Car Proton: A Dismal Failure, So Bury It

February 17, 2016

The Star reports:

 Wednesday, 17 February 2016

Proton to replace parts

SHAH ALAM: Proton Holdings Bhd will be recalling some 95,000 of its vehicles to replace faulty CFE oil cooler hoses, a problem that could potentially cause the engines to overheat.

Owners greeted the news with relief, with some crediting the national car manufacturer for what they saw as a shift towards greater transparency in handling customer issues.

In announcing the recall – its biggest to date – Proton chief executive officer Dato’ Abdul Harith Abdullah said the initiative was part of Proton’s move to revive the brand, which has seen dwindling sales figures in recent years.

He said the recall would affect 94,577 units involving 59,663 Exora units, 28,642 Preve cars and 6,290 Suprima vehicles.

Speaking at a briefing yesterday, he said the oil cooler hoses of the three models would break down when the cars reached an average mileage of 40,000km, due to the degradation of the internal tube material.

“We will call the owners individually and priority will be given to cars with mileage of 40,000km and above. We hope to finish this within the next six months.”

Abdul Harith added that Proton would be spending over RM2mil to replace the faulty hoses.

Abdul Harith: ‘Although we have improved ourselves in many small ways, we know very well that we cannot be complacent.’

“The hoses are cheap, about RM17 each, but labour cost will be expensive. So, we expect the cost to be over RM2mil,” he said.

According to Proton, the root cause of the problem was due to the hoses not being able to withstand the high temperature of the engines.

Ruptures can also be caused by skipped or prolonged services. The type of lubricant used could also be a factor.The national carmaker said consumers could take their cars to any of its service centres to rectify the problem.

“Affected customers are advised to bring their cars to service centres for free inspection and replacement of oil cooler hoses under warranty,” he added.

For cars outside the warranty period, the replacement process will apply provided the service interval is adhered to.

The National Car Proton: A Dismal Failure, So Bury It

by Koon Yew Yin

COMMENT: I was not surprised to see The Star’s front page headline, ‘A Hose of Problems’, on Proton this morning.

The founding of Proton National Bhd in 1983 was a big expensive mistake to begin with. Billions of ringgit from taxpayers have been lost in the process.

The hemorrhage seems to have continued forever. Malaysians have been wondering – is this the end to this unhappy saga of the government’s foray into the production of a so-called ‘national car’, or will the burden on taxpayers and car owners be continued in other new ways?

A revisit of this white elephant project could generate a larger public discourse, especially amongst taxpayers who should be more concerned as to where all the tax money they are paying have gone to.

One simplistic assumption which appears to have been made by former Prime Minister Dr Mahathir Mohamad, the initiator of the national car project, is that an industry that’s growing yearly should be profitable. It is not.

Jomo KS

Economist Dr. Jomo Kwame Sundaram- Staunch Proton Critic

In fact, industry data shows that the total profits of all the car companies in the world over the last few decades amount to only a modest return, and that only for the fittest in the industry.

The British Experience

Consider the case of British Leyland, a vehicle-manufacturing company formed in the United Kingdom in 1968. It was partly nationalised in 1975, with the government creating a new holding company.

The company incorporated much of the British-owned motor vehicle industry, and held 40 percent of the UK car market.

Despite containing profitable marques such as Jaguar, Rover and Land Rover, as well as the best-selling Mini, British Leyland had a troubled history.

In 1986 it was renamed as the Rover Group – later to become MG Rover Group, which went into administration in 2005. This ended mass car production by British-owned manufacturers.

Today, many British car marques have become owned by foreign companies. For example, MG Rover Group and the Austin, Morris and Wolseley marques have all become part of China’s SAIC Motor Corporation Limited.

The Recalcitrant Mahathir

Why is Mahathir’s inability to learn anything from the disastrous British car industry experience, something that completely escapes many Malaysians?

Surely, any good leader would have had his officers to do due diligence.If they had done so, they would have found that the industry – even with year on year rises in sales – is not guaranteed to generate good returns to shareholders, even in a highly developed economy with a long tradition of successful car manufacturing such as Britain.

This is because one of the forces that limit profitability, is the intensity of rivalry between car companies from around the world. This leads to oversupply and pressure on prices.

Moreover, it is exacerbated by a high degree of freedom for new competitors to enter the industry.

Unless there is an enormous internal market like China’s or the United States’ – and we can take advantage of the economies of small-scale producers such as Malaysia – we are forever doomed to a minor placing or bankruptcy in the market place.

Played out by Mitsubishi?

Maybe We should investigate the links between Dr. Mahathir, Mitsubishi and The Mind of The Strategist Kenichi Ohmae–Din Merican

As far as Proton is concerned, Mahathir’s mistake in ignoring the economic fundamentals of the industry was compounded by our lack of expertise or comparative advantage to produce cars.

The anticipated technology transfer from Mitsubishi did not take place – this should have been anticipated. Why should Mitsubishi transfer their know-how to Malaysia, when it can control the pace of transfer to maximise its profits?

In fact, the top management of Proton should ask Mitsubishi to open their books to see how much profit they have made from Proton since it began its operations. Mitsubishi knew that Proton could not do without them, and they were quite happy to continue making money from Proton while the company here continued to bleed to death.

To encourage people to buy Proton, the government increased the import duty for other cars and car parts. As a result, the consumers have 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 the national car.

Another question to ask is: why several car manufacturers, until recently, appear to have gotten into bankruptcy? Only then can prices rise relative to the costs, and shareholders would be able to get a fair return as well.

There are two main reasons. In some countries there is always the perennial optimism of managers and shareholders. In Malaysia, the reason is different.

Here, our government has been changing rules and regulations to obstruct other cars from entering our market, whilst providing special favours – including an ever-ready supply of financial assistance to keep Proton afloat.

The end result is that some Malaysians have ended up with more expensive cars of other brands, whilst most Malaysians have had little choice but to buy Proton – a poor substitute!This is the price we have to pay for brainless patriotism.

Ours is a sorry saga which is a classic case study on how not to set up a car industry.As with the national airline, I propose that a special course on our experience with Proton be offered in the ‘Institute of Dr Mahathir Mohamad’s Thoughts’.

What better way to honour Mahathir than a postgraduate course on his pet project – the national car – and inviting him to be a guest lecturer! I am sure he will have lots to share and many people to blame as to why the project has failed.

KOON YEW YIN, a retired chartered engineer, is a philanthropist.

14 thoughts on “The National Car Proton: A Dismal Failure, So Bury It

  1. It may be one of the companies which may be providing opportunities for ‘fraud and corruption’ to some ‘loyal’ people to become instant millionnairs and employment to many otherwise unemployable graduates who are products of current education system.
    So why close it?
    Same like some others which are ‘restructured’ when losses are too big to be left in the accounts and losses transferred to tsxpayers and the company shows prefit within short periods for the proces to be repeated again as has been done in the past in some cases.

  2. Proton was a political creation, not to be confused with an organization chartered for profit. Its purpose was political, to show that Ketuanan Melayu can have their own national car, even though it is Japanese designed, with no notable engineering input from Malaysia. As in all Ketuanan initiatives, management up to the janitors was notably ketuanan, all done simply to show to the others that Ketuanan was capable and not handicapped in any way. As in all Ketuanan concepts, economics and development capacities are simply irrelevant. Proton could never be economically successful even if there was an annual 100 million unit demand. It was a political creation for a political Ketuanan purpose that achieved its goal of ensuring Malaysians get their fill of Ketuanan and nothing else matters. Proton is an embodiment of all that is wrong with Malaysia. Your government is not building a nation. It is simply looting on a national scale, and it is systemic and will continue to be so until, there is no more to loot.

  3. Din

    Similarly, Najib is a catastrophic failure, so why is he still around?
    Maybe, wise guy mootpoint can give us the answer.–Din Merican

  4. Perhaps, what drove the proverbial nail into the heart of PROTON was the issuance of much feared but lucrative APs for the importation of cars below 1800 cc.

  5. ‘Najib is a catastrophic failure…’
    I think just changing some parts of him, namely, the duck that waddles besides him clutching the birkin, would go a long way to relieve bolehland of its nightmare.

  6. Bury it?

    That will mean “burying” 1000s of Malay jobs, not to mention the great loss of ketuanan face.

    Robert Lam is right. It had nothing to do with economics or business. It was all about racial politics. We once had the tallest building in the World, something which even Japan never had. How come we are still a “developing” country?

    Proton has become a “tiger” which Mahathir or Malaysia could never dismount. It will just bleed to death sooner or later. The sad part is that the top politicians in UMNO / BN will not be affected but the ordinary Proton factory workers.

    Najib will never do anything to rescue Mahathir’s baby. Proton is now a component of Najib’s “war” with Mahathir.

    Technically, Najib is right. Proton is now a private company and therefore no longer the concern of the Government.

  7. The big picture is besides the irredeemable failure of Pro-Tong, is the infestation that so characterizes all Malaysian SOE-GLCs. It was not just Power Windows, Leaky Front and Rear Lamps and rubber seals all round, Rupturing Hoses, Crappy Absorber Mountings, Faulty Switchgear and Transmissions, but many whole Lemony parts.

    Octo planted the ‘Kehandalan-Ketamatkan-Korupsi’ (KKK – which loosely translated means Greedily Corrupt Experts), besides the Ketuanan Parasite into the minds of susceptible Malaysian cretins. The bottom value chain suppliers were put into severe disadvantage and stress. They were forced to produce sub-standard parts, because of the enforced Quota system and the subsequent kickbacks from every Mediocre, Tidak-Apa, Corrupt, Close Both Eyes Ahmad, Ah Liow and Thambi functionaries who infested the Corporate Ladder. Heck, even after it was made a Kroni Privatised entity. PDI (Pre Delivery Inspection) was likened to meaningless platitudes.Their idea of 3S was the Buyer was their Servant, a Sucker and darn Stupid.

    Not only that, for many years a sycophantic Tengku – who probably couldn’t differentiate a piece of Turd stuck to the bottom of his Bally shoes from melted power window gear – Ruled, with absolute hubris. Some nastier types would call that attitude, Bodoh-Sombong.

    But since i was a Patriot of sorts, i bought my youngest a Pro-Tong Neo CPS cuz he had just entered junior college and being hot-blooded Jantan, he wanted to impress the Female of the Species.. Now he’s cabut to greener pastures, i’m left with a Lemon which has a trade in value of a bullock cart. How, like that?

    And yeah, all those issues i mentioned above in para 1, happened to this citrus fruit!

  8. Look at auto companies margin and its pretty clear no one makes extraordinary profit anymore. It’s simple a mature industry and its not possible to be a new player profitably in such a big scale economics venture. Only way to do it is if you have a protected humungous domestic market or be Elon Musk possibly.

    Proton NEVER had a chance but worst, they kept making mistake after mistake. Mahathir learned something about business and industry BUT he simply is not an entrepreneur or a technologist nor a business expert even now.

  9. Which lost the most – Proton ? MAS ? Perwaja ?

    I came across a copy of Proton’s annual report in the 90’s. It provided a breakdown of profit figures locally and export markets. For that year the latter segment showed a mind boggling loss of over Rm 200 million considering the unflattering number of cars exported.

    Over the years I wonder how much subsidy had been incurred to showcase Proton’s emblem overseas.

  10. And the Ministry of Finance transferred state funds to GLCs and then did nothing about supervision.



  11. The Proton saga is the tale of Mahathir’s folly of gigantic proportion and should be buried pronto. Even before it was launched, there were already misgivings. Malaysia does not have the comparative, let alone competitive advantage of going into heavy industry. Decades before Proton was launched, Singapore was already assembling cars like Mercedes and Volvo. It then recognized that this is going nowhere and abandoned this industry.

  12. Proton is a symbol of Mahathir’s FAILURE of Malaysia to progress productively and competively with his ” Look East” policy to learn from Japan hard-working and competive habits, but instead, of its (Japan) lopsided protectionistic trade policy.

    In the early 1980s, we were far ahead of China, little ahead of S,Korea and Taiwan. Singapore was slightly ahead but was about to take off in terms of growth and progress.

    Today 35 years later, these countries are well-ahead.Most strikingly, China has lifted 500 million of its people to above the poverty line and has accumulated US$ 3.2 trillion in foreign reserves, both achievements, no country in the world had been able to attain.

    Singapore’s income per capita, today, is 8 times Malaysia.
    What has Proton benefited the people of Malaysia?
    Some mandane jobs that could be easily replaced and provided if those enormous billions wasted, had been invested in other viable projectds and development that would have brought growth and increased income ?

    Proton is a symbol and a measure of the country’s failure to success and progress,worse,a born losser .It has to be scrabed, so are the 1.5 million Bangladeshis that the Najib government intended to import.

    We can do better investing in our own human resources in automation and robotics that would guarantee good returns and progress, going forward.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s