To New York and Washington DC


June 18, 2016

Klinik Pakar Pergigian Dr. Kam's photo.

Management is about telling people what to do, and leadership is about allowing people to do what they’re capable of doing, toward a common vision. Basically, it is empowerment so that they are motivated to be the best they can be in  terms of professionalism and service. I agree with Dr.Kamsiah’s philosophy. (seen with her staff and yours truly for company) .

Note: Dr. Kamsiah and I will be leaving for New York and Washington at 2 am, June 19, 2016. So I will not blogging for the next 22-24 hours. Of course, we will be touching base with you on Facebook while enjoying  the hospitality and excellent of  the Emirates from Kuala Lumpur with a brief stopover in Dubai.  Till you hear from us in The Big Apple, our best wishes.–Dr. Kamsiah and Din Merican

Proton: An Expensive Mistake


June 9, 2016

Proton: An Expensive Mistake

by Koon Yew Yin

Malaysians deserve an explanation of why Proton, the brainchild of former Prime Minister Tun Dr. Mahathir Mohamad, remains in trouble, despite massive infusions of funds. The MITI Minister, Dato’Seri Mustapa Mohamed says that government cannot continue protecting and supporting Proton, and that the firm must learn to compete on its own after over three decades in existence. That is right. I, therefore, do not understand why the Malaysian Government must now subscribe to 1.25 billion RCCPS issued by Proton via GOVCO Holdings Bhd by way of a RM 1.25 cash payment. It is time to stop  using taxpayers’ money to underwrite a failed project.–Din Merican

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. in 1983 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 hemorrhage will continue unless the Government, the controlling shareholder makes some drastic changes to the current system of producing cars.

  1. 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.
  2. It is also essential to remove a few of the top managers and replace them with new people with the necessary experience.
  3. 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.
  4. 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?
  5. 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?

One simplistic assumption which appears to have been made by Dr. Mahathir, the initiator of the national car project, is that an industry that is growing yearly should be profitable. It is not. In fact, industry data shows that the total profits of all the car companies over the last few decades amount to only a modest return, and that too only for the fittest in the industry. Even year on year increase in sales will not guarantee generating 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. This is exacerbated by a high degree of freedom for new competitors to enter the industry.

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% of the UK car market.

Despite having 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 are now owned by foreign companies. For example MG and the Austin, Morris and Wolseley have all become part of China’s SAIC Motor Corporation Limited.

Another question to ask is why few car manufacturers, until recently, seem to go into bankruptcy? Then prices can rise relative to cost and shareholders can get a fair return.

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 concessions 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.

Koon Yew Yin is a retired chartered civil engineer and one of the founders of IJM Corporation Bhd and Gamuda Bhd.

MAS: Mueller’ s successor should have vision, experience and expertise.


April 29, 2016

MAS: Mueller’ s successor should have vision, experience and expertise.

by Scott Ng

http://www.freemalaysiatoday.com

http://www.freemalaysiatoday.com/category/opinion/2016/04/29/dont-make-an-issue-of-mab-chiefs-nationality/

At the end of the day, MAS is a business, and in a business you either prove yourself capable or you don’t deserve the job. This is our national carrier, and it should be a source of national pride, but we should not let national pride in and of itself be the sole determinant of whom we choose to lead it. That person should be someone with vision, experience and expertise.–Scott Ng

 

If there was any doubt about Christoph Mueller’s abilities as a business manager, this was dispelled last February when MAS, in its new incarnation as Malaysia Airlines Berhad, made its first monthly profit in years. His turnaround of our national carrier is indeed nothing short of phenomenal. So it was quite surprising to hear him announce his resignation as CEO, coming as it did less than a year after he assumed the position.

Some people are speculating that it was political pressure that forced the industry-renowned airline revival specialist to depart, though Mueller has denied this. He claims that personal reasons forced his hand, and he would be taking a huge financial hit with his departure.

While no Malaysian would be surprised to hear that rent seekers may have showed up the instant MAS turned a profit, what lies behind Mueller’s departure is his own business. But as conversation turns toward appointing a new head for the national carrier, there is some unsavoury talk about his status as a foreigner, with some saying the company should be run by a Malaysian, meritocracy be damned. Even PKR’s Tian Chua reminded the public that his party had warned about bringing in a foreigner to run MAS, saying, “It is unfair to bring in a foreigner at a critical time and ask him to turn around the national airline. How can he turn around the company if he does not understand Malaysian work politics?”

We do detect a touch of irony in Tian Chua’s remark, particularly where he refers to “Malaysian work politics”. Nevertheless, his complaint about the “unfairness” of hiring a foreigner instead of a Malaysian expresses a sentiment shared by a number of politicians on both sides of the divide.

Certainly, a foreigner would not be expected to be intimately acquainted with our politics, and MAS, like all national arms, is heavily linked to the ruling party. However, it seems rather a trite reason to protest against Mueller’s appointment. It appears that we Malaysians are indeed capable of extending our racism to include hostility to the idea of having someone from outside our ken coming in and telling us how to do our jobs.

The fact is that Mueller (above) was the most competent person willing to come in to help an airline that had lost two aircraft to tragedy in the span of a few months. He was chosen because he merited the role and the challenge, and no amount of hemming and hawing and subtle racism can take that away from him. Even if the announcement of MAS’ February profits seemed like one timed to save his face, he can still take pride in his achievement, considering the sordid state that the company was in after decades of national stewardship.

Look, it’s not about where someone comes from. At the end of the day, MAS is a business, and in a business you either prove yourself capable or you don’t deserve the job. This is our national carrier, and it should be a source of national pride, but we should not let national pride in and of itself be the sole determinant of whom we choose to lead it. That person should be someone with vision, experience and expertise.

 

More on the MAS-Mueller Story


April 29, 2016

More on the MAS-Mueller Story

by Mariam Mokhtar

http://www.freemalaysiatoday.com

MAS in its Glory Days under Saw Huat Lye and Abdul Aziz Rahman

Last February, Malaysian Airlines Berhad (MAB) finally made a profit after years of being in the red. Two months later, Christoph Mueller, the company’s first non- Malaysian CEO, announced that he would leave in September 2016, well before the end of his contract.

What prompted his decision? Why leave after making such brilliant progress? Did anyone believe him when he said he was leaving because of “changing personal circumstances”? Let’s see if we can find a reason for Mueller’s decision.

MAS Today

In 1994, former PM Mahathir Mohamad gave control of the successful national carrier, then known as MAS, to his crony, Tajuddin Ramli. But instead of taking good care of the golden goose, Tajuddin and successive chairmen strangled the company.

Making Tajuddin MAS’ executive chairman and selling the company to him was part of Mahathir’s bumiputera corporate advancement project.

Mahathir should have instead adopted his Singapore counterpart Lee Kuan Yew’s approach to running an airline. In 1972, seven years after Malaysia and Singapore split, the Malaysia-Singapore Airlines had to be disbanded. On the eve of the formation of Singapore Airlines, Lee told the workers’ union that his government would have no compunction in closing the company down if it did not return a profit.

 Mahathir, Najib and MAS Advisor Badawi

Now that MAB is back in the black, we fear that the government and its cronies will start to bleed it again until, perhaps, it’s time for another foreigner to come to its rescue. There are Malaysians capable of doing the job, but only a foreigner can wield the stick without inviting too much scrutiny. After all, MAB has political appointees on its board.

Mueller’s role is to act as a foreign advisor. He also gives the MAB board a semblance of respectability.When Mueller first arrived at MAS, he allegedly asked Khazanah how many middle managers the airline had. Apparently, no one knew. It is alleged too that middle managers were running their own firms and bleeding MAS dry by providing services at inflated prices.

When the first cull was made in MAS, the cronies were the first to go. You might think this was a good move, but a MAS insider alleges that it was actually a plan calculated to give a golden parachute to faithful cronies. The cronies and middle managers received handsome retrenchment terms calculated from the time they were first employed. Some had been there for three decades. They received huge amounts in compensation.

Christoph Mueller, and Ahmad Jauhari Yahya

Aware that MAS could not afford to continue giving away these vast sums of money, the management announced that over the next few years, more people would be sacked or asked to retire early but would not be given the same generous compensation terms. In effect, it was a way of getting rid of workers cheaply.

When MAS changed its name to MAB, the employees who were thankful they had been retained had to accept new terms in their contract, which included the prospect of having their services terminated with only two months’ notice. That was why MAS workers were unhappy. Cronies were rewarded. Genuine, hard-working employees were treated shabbily.

So, did Mueller decide to leave because he has a conscience? Or was he concerned about his reputation? He once turned around the ailing Aer Lingus, but with all that is happening in Malaysia now, he probably realises that the longer he waits, the more he risks messing up his CV.

In the 1960s and 1970s, many proud Malaysians were happy to serve MAS. It was a respected and successful airline. If we were to remove political interference, MAB could soar in the skies once again.

Remembering Lee Kuan Yew: A life devoted entirely to Singapore

Mariam Mokhtar is an FMT columnist.

MAS and the Mueller Story


April 28, 2015

MAS  and the Mueller Story

by P Gunasegaram

http://www.malaysiakini.com

QUESTION TIME | Malaysia Airlines Bhd’s first non-Malaysian CEO Christoph Mueller announced he is stepping down last week barely one year at the top seat for “personal” reasons. Why? And, was he good for Malaysia Airlines?

Khazanah Nasional is now pumping in some RM6 billion into the airline for its recovery plan and in addition to the RM17.4 billion pumped in over the last 14 years, the total spent is soon likely to hit a massive RM23.4 billion. Will it be worth it?

Unfortunately statistics from Malaysia Airlines are insufficient to say how good a job Mueller has done. Where there is a paucity of information there are usually problems – why would anyone hide good news?

Mueller, appointed in March last year, will step down in six months as he serves his notice out – one and a half years before his contract ends. He will be a non-executive director after that. That Mueller can stay on for another six months is clear indication that his “personal circumstances” are not urgent, indicating other reasons why he is stepping down.

There are two sides to turnaround – cutting costs and increasing revenue. It is not only about turning to a profit – it is about sustaining a profit which the airline is capable of given its previous track record.

The easy way to turnaround is to shut down unprofitable operations, sell related assets and keep only profitable ones. That mean smaller profits but forever destroying the ability to rake in larger profits. If you want to turn around the entire operations, it’s a lot more work.

Mueller has overseen the cost-cutting quite well, much of the groundwork having already been laid by Khazanah Nasional before he came aboard. Some 6,000, or about 30 percent of workforce, have already been laid off. Routes have been cut drastically – and Malaysia Airlines is now just a regional airline with Emirates providing international connectivity. That may be a major problem.

At the heart of all airline operations is revenue management – the fine-tuning of ticket prices to ensure  the plane is sufficiently filled at a price which will maximise revenue. This is done for every single route.

If this is done right, the yield or amount received per revenue passenger km (RPK – no of paid seats multiplied by km flown) increases while the load factor (the amount by which seats are filled) are optimised to give maximum revenue.

This excellent article titled ‘What’s wrong with Malaysia Airlines’ gives a full explanation of how yields work for those who want a fuller explanation. The bottom line is if your fares are too low, you can have a serious problem.

From the chart, yields at Malaysia Airlines grew sharply after Idris Jala became CEO. By 2006 MAS’ yields were in tandem with some of its regional peers like Cathay Pacific and Thai Airways. The impact of the increasing yields on MAS’ bottom line was quick, and in 2006 losses were reduced to RM100 million from RM1.3 billion previously.

By the end of 2007, Malaysia Airlines’ yields were the highest among the regional airlines, and its net profit among the highest ever historically with some RM900 million. The onset of the global financial crisis resulted in yields tumbling across the board but Malaysia Airlines’ yield was the slowest to recover in the subsequent years and tumbled sharply post 2012, showing a wide gap with the yields of other airlines – the underlying problem for the airline.

Malaysia Airlines actually had a cost advantage over the other regional airlines in terms of costs per available seat kilometre (ASK – available seats multiplied by kilometres flown, a measure of capacity). Thus yield, not costs, was Malaysia Airlines’ core problem.

Khazanah Nasional figures show that Malaysia Airlines yield, measured this time in terms of revenue per available seat km, or Rask, at 20 sen, has a yield gap of 2.7 sen compared to the average of four other regional airlines – Cathay Pacific with a Rask of 24 sen, SIA (22.9) Garuda (22.5), and Thai (21.5). This means among the five, Malaysia Airlines charges the lowest fares relative to its capacity.

This is important – former CEO Ahmad Jauhari Yahya estimated that one sen in Rask accounts for RM500 million in revenue. That implies that 2.7 sen accounts for RM1,350 million. If Malaysia Airlines’ yield improved to industry average, the airline will be easily profitable. Also, Khazanah Nasional figures show that Malaysia Airlines has costs per ASK or Cask of 21.4 sen, below the peer average of 22.2 sen.

A battle Malaysia Airlines will lose

The problem becomes clear – Malaysia Airlines has the lowest unit cost which is good, but it also has the lowest unit revenue which is bad. All it has to do is to increase the unit revenue and its safe home. That however is a complex process undertaken with complex computer simulations and trial and error.

Has Mueller managed to do that? Unfortunately we don’t know because Malaysia Airlines does not provide the necessary figures. All he has said recently is that the airline turned to profit in February and even then did not say how much and how. What he should have shown is the progression of unit costs and revenues relatives to its peers. Then we would have known exactly what he has achieved and what he has not.

The paucity of information means that Mueller probably has things to hide. Anecdotally, there is evidence to indicate yield management is poor. I checked return ticket prices to Bali from Kuala Lumpur three months out for Malaysia Airlines and AirAsia. Guess what, it is about the same price of around RM850.

If a full-service airline is charging low-cost airline prices there really must be something wrong over its pricing especially for Malaysia Airlines, which has been on Skytrax’s list of 5-star airlines many times but recently seems to have dropped out though.

On top of that, there is the silly decision from this year to suspend serving of alcohol on short flights of three hours and less, even on business class and first class, a short-sighted decision that puts it severely at a disadvantage relative to its peers. Even all the major Middle Eastern airlines serve alcohol with no restrictions.

The way Malaysia Airlines is going, it is becoming a ticketing agent for Emirates internationally with the code-share arrangement it signed while it is shrinking its operations to become a regional airline taking on the likes of successful low-cost AirAsia – a battle it will lose. A full service airline cannot compete on cost with a low-cost airline – Khanazah Nasional figures show a huge 6.3 sen cost gap between AirAsia (14.8 sen Cask) and Malaysia Airlines (21.1 sen).

If Malaysia Airlines’ intention is to give up the international routes in favour of Emirates, to which it effectively becomes a ticketing agent, and fight an unwinnable battle regionally on cost with AirAsia – it might as well close shop and save the country billions of ringgit.

The true test of turnaround is not an indiscriminate lopping of loss makers but a carefully considered attempt to turn into profit a substantial portion of an enterprise’s entire operations. Otherwise, we might as well appoint liquidators.


P GUNASEGARAM laments terribly the extreme erosion of the Malaysia Airlines brand name, a reasonably competent and efficient airline whose service is still among the best in the industry, over the last few years. Contact: t.p.guna@gmail.com.


 

Malaysia Airlines:What Mueller could not do


April 28, 2016

Malaysia Airlines:What Mueller could not do

by Marion Tharsis

http://www.freemalaysiatoday.com

Khazanah Nasional Berhad probably expected too much from Christoph Mueller when it hired him to work his charm on MAS. Despite his glorious past, the turnaround expert probably didn’t count on the work culture and ethics and, most of all, the political environment in a government-linked company.

Mueller made all the obvious moves. He trimmed the work force, removed unwanted suppliers and closed unprofitable routes. What he could not do was remove political control. He probably learned soon enough that it would be futile to continue with his work, with so many hands pulling him from all sides to do their bidding.

Another person may try his or her hand at making MAS profitable again, but the same pressures will reduce the CEO’s position to that of a puppet to be manipulated.

So our once glorious airline is back to square one. The competition is overwhelming. Other carriers, including our very own AirAsia, are always looking into ways to make their companies more profitable through innovation.

We should not expect too much from the incoming CEO. He or she may be prevented from cleaning up certain kinds of mess. For example, he or she might not get a free hand to select a management team that would be capable of taking MAS on the path of good and solid governance.

An airline cannot run effectively merely on superficial changes. It needs an operating system that is smooth, unhampered, cohesive, innovative, customer focused, and competitive. Only then can it stay afloat in a tight and narrow market and play on a field that keeps re-inventing itself.

An airline that is subject to too much political control will keep failing and continue to be an embarrassment.

Marion Tharsis is a  FMT reader.