Business

Saturday April 11, 2009

The long winding road


Proton

PROTON Holdings Bhd was the brainchild of Tun Mahathir Mohamad as part of the country’s drive towards industrialisation. The concept of a national car was first born after Mahathir visited the Mitsubishi Motors in 1981 and in February 1982, the Cabinet approved the national car project and in May 1983, Perusahaan Otomobil Nasional (Proton) signed an agreement with Mitsubishi on the many facets of manufacturing a car in Malaysia.

Datuk Mohd Nadzmi Mohd Salleh

Production of the Proton Saga, a name that was chosen in a contest, started in September 1985 and was essentially a rebadged Mitsubishi. As production grew so did the vendor base in the country which eventually saw a growing percentage of the car being made in the country.

Initial sales of Proton cars were hampered by a recession in the mid-1980s but by September 1987, Proton had produced its 50,000th car.

In 1988, Mitsubishi took control of Proton’s management and by December 1989, the company rolled out its 150,000th car from its production line.

In 1989, Proton started a local engine assembly project and by May 1990, the company had produced its 200,000th car.

Sales of Proton cars grew rapidly during the early 1990s after the Iswara and Wira models were launched. In July 1993, Proton produced its 500,000th and within the next two years, the company rolled out new cars such as the Satria and the Perdana. The success and growing importance of Proton had made it a target for takeover and in November 1995, the late Tan Sri Yahaya Ahmad acquired a controlling stake in Proton.

That was followed by the launch of the Tiara – which was the first poor performer for the company – in April 1996 and by October 1996, Proton, through Yahaya, had taken control of Lotus. Yahaya then replaced long serving managing director Datuk Mohd Nadzmi Mohd Salleh with Tengku Mahaleel Tengku Ariff.

Proton and the country was then shocked by the death of Yahaya in a helicopter crash in March 1997 and stewardship of the company was then passed on to Tan Sri Mohd Saleh Sulong.

The technical skills of Lotus was then used in the rollout of the Perdana V6 and the Satria Gti in November 1998. The Asian Financial Crisis had taken its toll on Proton and its parent company then, the DRB-HICOM group and in December 2000,the DRB-HICOM group sold its controlling interest in Proton to Petroliam Nasional Bhd.

The new millennium, however, was not kind to Proton. Its fortunes were mixed at best with success in the Waja model but models such as the Arena and the 1.8 litre version of the Waja did poorly. Its market share started to slide, which at its peak was over 60%. And as total market volume grow, non-national car makes found favour with buyers once again and a Perusahaan Otomobil Kedua Sdn Bhd (Perodua) - the second national car - started to perform better.

In 2004, Proton launched the GEN.2 which saw the first Proton model that featured the company’s proprietary Campro engine.

Sales of the GEN.2 did not meet expectations and by March 2004, Proton ended its longtime association with Mitsubishi.

The bitter break up left Proton to chart its own future and in the same month, Proton had also disassembled its wholesale agreement with Edaran Otomobil Nasional Bhd and appointed the former exclusive distributor a super dealer as it prepared its own subsidiary Proton Edar to take on the role of wholesale distributor.

The turbulent times within Proton took another turn for the worse after it launched the Proton Savvy in July 2005. Sales disappointed and in controversial fashion, sold motorcycle subsidiary MV Augusta for one euro as the company was faced with a huge impending debt bill from the Italian company.

The following couple of years were also unkind to Proton which was left with a stable of old cars, unwanted models, falling market share and financial deterioration which saw the companies fall dramactically, culminating in a loss of RM589.5mil in the company’s 2007 financial year.

But Proton’s fortune slowly improved after the company’s balance sheet was cleaned up and after the launch of Persona.

The immediate success of the Persona and the turnaround management was experiencing in the company was the impetus for top management to go to the Government and request that a widely expected deal between Proton and Volkswagen be callled off and the company be given a chance to chart its own course.

Management’s wish was granted by the Government in January last year, the company with the launch of the new Proton Saga finally weaned itself off the first two most successful models in its short history.

In December last year, Proton revived ties with Mitsubishi when it signed a development agreement with its former partner and shareholder. The first act of the new ties would be for the replacement model for the Waja and in March this year, Proton entered into a licensing and contract assembly deals with Detroit Electric for an electric car based on the Persona and GEN.2 platform.

Perodua

PERUSAHAAN Otomobil Kedua Sdn Bhd (Perodua) was established in 1993 and was to spearhead the country’s development of a compact car. The entry of Perodua as the second national car maker was viewed to be not a competitor to Proton but rather complement the industry by making compact cars for Malaysians.

Perodua was a joint-venture company between Malaysian and Japanese partners and the shareholders of Perodua are UMW Corp with 38% stake, Daihatsu Motor (20%), MBM Resources Bhd (20%), PNB Equity Resources Corp Sdn Bhd (10%), Mitsui & Co (7%) and Daihatsu Malaysia (5%).

The factory was officially opened by former prime minister Tun Mahathir Mohamad in August 1994 and the company’s first car – the Kancil – was launched on Aug 29 the same year.

With the initial capacity of the factory at about 45,000 cars a year, demand for the Kancil was strong and in just over a year, in December 1995, the company rolled out its 50,000th car. The success of the Kancil led to Perodua launching its first national commercial vehicle, the Rusa in March 1996.

In May 1997, production capacity was raised to 120,000 units annually and by January 1997, Perodua rolled out its 100,000th car and in August 1998, the company unveiled another first in Malaysia, the country’s first locally assembled four-wheel drive vehicle, the Kembara.

Tan Sri Abdul Rahman Omar

Perodua continued to prosper in the following years as new models added to the success of the Kancil, which in September 1999 rolled out its 250,000th car under the stewardship of former managing director Tan Sri Abdul Rahman Omar.

New models were subsequently introduced which saw the Perodua Kenari introduced in June 2000 and in August the next year, the Kelisa was launched in Malaysia.

In 2002, the new look Kancil was launched and marked the first time a major facelift for the Kancil was done.

Access to Daihatsu’s parent company Toyota’s technology led to the Kembara gaining access to Toyota’s DVVT technology that boosted engine performance and lowered petrol consumption.

A huge turning point in Perodua’s history came in May 2005 when the Myvi was launched. The car was a wild commercial success for Perodua and initial sales were more than double what the company had originally forecast. Huge waiting lists ensued and Perodua devoted more resources to building the Myvi.

When Perodua rolled out its millionth car on August that year, what it achieved in December that year was arguably an even bigger milestone.

In December 2005, Perodua, helped by the popularity of the Myvi, surpassed Proton in terms of monthly sales and has remained the largest seller of national cars since.

In October 2006 Perodua’s Myvi receives the Autocar Asean‘s Car of The Year 2005/2006 Award and in October that year, the company had produced its 100,000th Myvi. By March 2007, its market share was over 50%.

In May 2007, Perodua launched the Viva hoping that it would emulate the sales performance of the Myvi and in September that year, the Perodua Viva received the Car of the Year Autocar Asean Award 2007 in the Supermini segment.

In June 2007, the Myvi received the Best Model of the Year (Malaysia) Award at the Frost & Sullivan 2007 Asean Automotive Awards and in June 2008, the Viva received the Best Value for Money Model of the Year (Malaysia) at Frost & Sullivan Asean Automotive 2008 Awards.

Perodua cars continue to do well in Malaysia due to not only the compact size and fuel efficiency, but also the affordabilty of its cars. Those characteristics were important in making Perodua cars appealing to first-time buyers, usually comprising fresh graduates, which account for 30% to 35% of the company’s sales and those who are joining the workforce for the first time.

Apart from fresh graduates and new workers, Perodua cars were also popular as an additional car for a family as that accounts for about 40% of the company’s sales. The car is also popular as a first car among young adults.

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