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Tuesday, June 02, 2009

The Proton Saga (part 2)

Proton Holdings Berhad, at group level, made a loss of RM338 million for the financial year ended 31.3.2009. That means, from April Fool's day in 2008 till the eve of April Fool's day this year, Proton lost RM338 million. The full report can be read at the Malaysian Insider.

Proton earned a total of RM6.49 billion in that period. That is an increase of RM865 million over its earning for the previous financial year (2007/08). Although Proton earned less in 2007/08, it managed to post a profit of RM144 million in the same period. Quite obviously, Proton's operating costs have gone up in 2008/09 as compared to 2007/08.

In addition, Proton sold more cars in 2008/09 than in 2007/08. In 2008/09, Proton sold 156,845 cars while in 2007/08, it only sold 139,952 cars.

Let's analyse the figures.

In 2007/08, Proton's total earning was RM5.625 billion. It sold 139,952 cars. What that means is, Proton's average earning per sale was RM40,192.35 (5.625 billions divided by 139,952). In that same period, Proton made a profit of RM144 millions. Which means, for every car sold, Proton made a profit of RM918.00 (144 millions divided by 139,952). Therefore, in 2007/08, the break even point for Proton was RM39,274.35 per sale (RM40,192.35 minus RM918.00).

In 2008/9, using the same methodology, Proton's average earning per sale was RM41378.00, representing an increase of RM1186.00 than the average earning per sale in 2007/08. Proton however made a loss of RM338 millions. Which means, for every sale, Proton loss RM2155.00. Proton's break even point had in fact risen to RM43533.00, a rise in cost of a whopping RM4259.00 per sale!

At this juncture, I must say that an average  profit of RM918.00 per sale in 2007/8 was disappointing. In fact, "disappointing" is an understatement. Embarrassing is more like it. And for the average cost per sale to have risen by RM4259.00 in the following year (2008/09) requires a lot explaining to do.

The thing is this. Proton is the darling of the Mahathir Government. It continues its "darling" status under the Badawi administration. It is exempted from import duties in respect of its imported components. That results in hundred of millions of ringgit in revenue loss for the country. Consequently, it is us, the people, who are subsidising Proton.

In addition, the Government subsidises the production by giving grants and further exemptions. To top it up, the Government protects Proton and its products by imposing high import duties on other imported cars. Approved permits are also required for imported cars just to protect Proton's business. One AP costs about 25000 ringgit (there are instances where APs are sold at 30000 ringgit!). Ultimately, it is us, the people, who are paying all these hidden costs.

As a road user who do not buy a Proton, I am in fact subsidising Proton through the followings:

  • the loss in revenue by exemptions against duties and taxes given to Proton
  • the grants given to Proton
  • the amount I have to pay for the AP for my imported car
  • the high import duties imposed on my imported cars

Added to that, the man hour costs which every Proton owner waste in the workshop because of the frequent problems he or she  encounters with his or her Proton. The time to get there. The time spent on waiting. The money spent on repairs (just bear in mind the famous Perdana gearbox problems and the famous power window problems in the Waja and Gen-2, for instance). The stress suffered arguing with the Proton people. All these are losses suffered by us, the people. All in the name of protecting Proton and pursuing a lost dream.

After almost 25 years, Proton makes an average RM918.00 profit in 2007/08 for every sale! Look at Honda. Within 20 years of the ubiquitous Honda Life, it manages to introduce a ground breaking Honda NSX with the now industry standard variable valve timing (V-tec) system.

Within 15 or 16 years of Honda Life, Honda was F1 champion, during the turbo days with its 1.5 litre engine! It was such a fast and capable car in F1 so much so that turbo engines had to be banned form F1 at the risk of Honda winning F1 championship non-stop for the next 15 years! What has Proton won? The MME at Sepang? The Malaysian Super Series?

What ground breaking technology has Proton managed to come out with in its 25 years? The truth is Proton can't even build a trouble free power window, let alone a ground breaking gear box system or ECU.

The question is, then, what has gone wrong? Who is responsible for this auto debacle called Proton? Why is it not fixed? How long more are we, the people of Malaysia, are going to suffer losses, notional or otherwise, because of Proton? Why must we, the people of Malaysia, continue to assist Proton?

Various accounting-babbles were blurted by the Chairman in trying to explain the losses. Apparently, it was mainly due "to  Proton’s decision for the impairment of PPE and inventory write-down for certain models impacted by volume contraction." Big words indeed Mr Chairman, Sir.

What it simply means is that Proton had to reduce the book value of some of its cars and plants. Why, you may ask? Well, it is because cars of these models cannot sell. And therefore the plants or production lines for these models loss their book value. Why don't the wise Chairman tell us what PPE had been impaired and which models have to be written down?

My guess is the Savvy. An absolute wonker of a car. "Your first Lotus", as it was spun in Great Britain, to much ridicule  by Top Gear (you can watch it on You-tube, where Clarkson made a hell of an embarrassing joke about that marketing spin!). Excuse me. The Savvy is my first Lotus? Good God! How about the Waja then. My first Lexus?

Which begs the question, who is to be held responsible for the impairment and write downs? You don't just impair or write down for fun. It was done for a reason. And the reason is the abject failure of the relevant model and consequently, the PPE in respect of that particular model.

Who was behind the model? Who was responsible for the design and production? Who was responsible for the marketing aspect of it? It was obvious that the Myvi killed the Savvy even before it was launched. It was a debacle. Now, are heads to roll because of this?

Well, you and I know the answer. No head is going to roll. Nobody is going to be held responsible, let alone, accountable.

That is precisely the malady which infests Proton. And that is part of the problems. Added to that a vendor system which is not transparent and is so full of mediocrity, below industry standard quality and  probably, cronyism. All these contribute to this great Malaysian failure, Proton.

PS The first part of the Proton Saga can be found here.



Tiger said...

For sake of maintaining the jobs of 20,000 Malaysians, 20 million Malaysians have to suffer with an inferior car for the past 20 years.

Anonymous said...

Well, it's the brainchild of Dr M, he can't afford to let it go bust. We drive around in Protons while he drives around in a Porsche Cayenne Turbo S, mind you.

KK said...

AH , what about the lives which are lost in accidents ?
Proton cars are unsafe and are practically 'coffins on wheels' !

donplaypuks® said...


In 2007/08, Proton's profits were boosted by $194 million Govt R7D Grant. Otw, the real profit would have been about $10 million which is a piddling amount for a auto monopoly. In 2008/09, I read it that the R&D claim for the last Qtr was $81 million, though what the amount is for the whole year, is not clear.

Why these grants are included as part of profits is not clearly and I don't care what the International Accounting Standard says. It's all plain window dressing.

Proton is in the biz of making and selling cars, not milking Govt grants.

And all these UMNO/BN CEOs and Chairmen have been house trained in the art of spin. So, they report on '1-off write down on Fixed Assets for impairment in value' without really telling who was responsible for these bad decisions or which model of Proton cars it relates to.

You'd think that before they marketed a car in UK as 'your 1st Lotus' they'd have consulted Top Gear or some other top car consultant. But no, the guys in Shah Alam and Rawang know better until you have to write off the whole amount.

So, the rape of our coffers goes on!

Anonymous said...

Who are the jokers in Proton that allow Tiara, Juara and Savvy to be badged as Proton...it's a disgrace.

To any Malaysians with a pair of 'reasonable eyesight' first glance at these model will make them despise the design much less possessing them.

Have you all forgotten the look on Dr Mahathir during the launching of Juara. Remember telling my wife "If I were Mahathir, I would not even attend the launching ceremony for such an awful looking tin-can"

Perhaps, MACC should look into details of how in the first place Proton took Juara into its stable.

Hamba said...

Anon 14:43, you're so right...Rakyat is not patriotic when we lament the horrible quality and price of Proton but mahadey can mozey on along in his luxurious million ringgit foreign car and he gets a TUN. Proton is and was a big rip off... A horrible and inferior crap of a car and the rakyat have to pay tens of thousand for it. Without proton the rakyat should have been able to buy a camry for the price of a waja... Mind you there won't be multi millionaire UMNOputras AP holders too. Now, that sound good isn't it!

Anonymous said...

Demi our national ego or was it protection of the balls, we turned down one partner after another.

couple of weeks ago, VW announced that they will be assembling Toureg and other models in Indonesia.

So we are going to 'biar mati anak jangan mati anak'??? Sorry, I can't find a similar analogy in English ..


Eyes Wide Open said...

it's a fact of life - pampered kids never do well.

i'm not economically trained, but i don't need economics to tell me that the proton is crap. the savvy is one in a long line of crap cars - the french-reject Tiara, the abominable Juara, etc.

But the Malaysian car reviewers have been spinning this crap positively for donkey years and the average consumer have been conditioned to expect to sacrifice on average 2-3 years of their salary for a piece of crap.

The only reason why Proton is still alive is because of all the govt protection that artificially makes it one of the "cheapest" cars to own.

while the japanese (and now even korean) models have an average lifespan of 10 years before a brand new model boasting cutting edge technology is introduced (with several upgrades in between), proton can't even keep up with today's basic technology, selling the same crap again and again to a resentful public. What other car company in the world is still selling a face-lifted 30-year-old model a.k.a. Iswara?

good god! even the koreans who made laughable cars 15 years ago are mounting a serious challenge to the japanese today! proton, justlike so many things in malaysia, is being left behind in the dust of once-inferior companies.

and now the news is that after mysteriously spurning a partnership with premier car company volkswagen, proton is now set to team up with a minor China manufacturer?!


the national car project is an utter disgrace!

good man said...
This comment has been removed by a blog administrator.
art harun said...

Mr Good Man,

I have deleted your comment for obvious reasons.

Monkeynut said...

Just Proton? If only it were so. When Naza launched the Forza, we were told it was a Malaysian car. It is as Malaysian as the Kias they are pimping. The car is a Geely...from the PRC.

APs are used to limit the range of vehicles that manufacturers can import. For example Toyota just cannot get APs for the full range of vehicles that they offer which is why Estimas, Alphards and Land Cruisers all have to be bought from grey importers with dubious warranties.

Anonymous said...

kenape korang masih cakap proton keluarkan iswara. mana ade iswara baru lagi sejak saga blm keluar.tp ingat corolla punya nama dah berapa lama pakai.

klu bwk bmw pun klu accident mati jugak. ada bukti ke orang mati sebab inferior engineering oleh proton. betul airbag kat kereta proton kurang sikit tp klu bwk mcm setan, airbag pun tak guna.

kebanyakkan cerita pasal last gen punye produk line. klu nak condem pun, condem la this generation punye model.

pasal savvy, tak de la buruk sangat tp just not what the people wanted. semua pembuat kereta ada dud die sendiri.

lepas tu komen pasal power window, again ni komen untuk last generation punya produk line. tp kebanyakkan sekarang, ok tak de problem. honda dgn toyota pun ade problem kat power window.

tapi kesimpulannya, klu nak kritik proton pun biarlah ada isinya. yang proton buat betul kenalah ambil kira.jgn membabi buta saja memuja kereta luar.tu fanatik namanya

Anonymous said...

Anonymous 02 June 2009 20:49,

Aku tak tau sama ada Proton Wira aku ni gen baru yang kamu kata, baru beli setahun setengah lepas.

First impression ialah
- Odometer (mileage) tidak berfungsi. Rupa-rupanya satu cable dari engine ke odometer di-disconnect. Entah sudah berapa kilometer kereta "BARU" saya sudah digunakan sebab cable itu sengaja tidak dipasang. Ada satu receipt toll dari KL ke Kuantan (saya dari kuantan) di dalam kereta "BARU" saya jugak. Apa boleh buat? Terima sajalah kerana orang proton kata kereta saya memang BARU dan dihantar dengan truk.

- Reverse sensor tidak berfungsi (beep-beep-beep saja semasa reverse). Bawa ke servis centre Proton. Orang di sana kata reverse sensor dalam kereta saya bukan original and sudah rosak. Suruh saya tanya agen. Assessori bukan-original dalam kereta baru pertama kali saya dengar.

Selepas satu tahun Central Locking tidak berfungsi lagi.

Kamu kata generasi baru tidak ada masalah? Betul ke?

telur dua said...

Be around the PWTC during any UMNO General Assembly and observe what car they drive.

You can't miss how UMNOites 'patriotically' drive Porches, Mercs, Beemers, Range Rover Sport etc.

Peasants usually have to be contented with a Proton or Perodua.

Those country bumpkins who support these warlords who milk the nation is doing a great disservice to the rest of the citizens who don't.

Anonymous said...

Once I was driving my late father inlaw' proton, I went into little longkang or rather muddy little drain,managed to get out, but all of a sudden the car couldn't go forward only going reverse--couldn't be used anymore had to replace the gearbox-isn't it weird!


Anonymous said...

i wonder why everyone is so pissed at the mentioning of proton? to me it's the best idea i ever heard. if others can do it, why can't we? but i'm sad to see it in its sorry state.

i had done my time in proton last year and i'm impressed with their engineers. but the problem is their top management. they don't know how to make good cars only good money.

just get someone with the know how to manage proton and remove the political interference that has been screwing it and hopefully evrything will turn out alright...

Anonymous said...

We've always been subsidising the BN gomen.

We have to pay toll because they can't give us proper roads.
We have to watch Astro because we get lousy tv programmes.
We install water filters because they can't give us clean water.
We pay the IPPs because they can't supply electricity.
We pay tuition fees and build private schools because they can't educate our kids.
We pay for security because the police can't guarantee that.

We pay a premium to keep BN in power! How long can we afford the luxury?

HSK said...

Not only Proton is trailing behind Korean and Chinese car manufacturers, in fact the country is behind Hongkong, Singapore, Korea and Taiwan when not in the too distant past , we were leading them.

If things are allowed to proceed as usual , when Malaysia's crude oil resource is exhausted, the nation will become a banana republic for good.

elizabeth said...

The good old days before we had proton, Honda or Toyota 1300cc only goes for below RM15k. Now it is all fairy tale, thanks to our national pride pumping proton.

I shall not argue about how many local vendors have benefited, and the jobs created. But all for what? In these days when the buzz word is core competencies, is car manufacturing our core competency? Are we saying that, if we close down proton, those employees and local vendors will hve zero income? Come on, that kind of thinking would be a great insult to us as a people.

Yes, after being spoon fed for 25 years, it would be tough to make a switch. But change we must. Lets look at what we can do well, and do that!!

Right now, the resentment level against proton is high I think. In my office building, I see a lot of my colleagues driving a honda or toyota. They are middle level execs, and inspite of the higher price tag, they are rejecting proton.

No need for a crystal ball, the future of proton is very bleak. Just look at the share price... Net asset per share of RM10 (not counting the appreciation of its landbank in Glenmarie, for example), people are willing to only pay RM2+.

So people are not just rejecting the car, you know....

Anonymous said...

STFU art... u know nothing u are the shit.

art harun said...

Dear Anonymous at 9:38,

Thank you for your intellectual input. Very enlightening. By the way, what is STFU?

kind regards.

Anonymous said...

After 20 years, I wonder why do we still need to share the technology with Mitsubishi?

How about the interior in latest Proton's car...ugly looking plastic material?

The same issues with the windows,seats and gearbox?

You know why? Because most of the suppliers for these products are related to Prime Ministers and Ministers family.

We must not blame entirely on Proton They did a great job but the politicians fck it up!