This is another hot new story about our local automotive company, Proton. It has been prolong for very long time for Proton to come into decision of either having strategic collaboration, partnership or management buy-off. Shares has been moved up and down, but nothing change. Business remains as usual for Proton staff.
Today, Nadzmi (current Chairman of Proton Holdings) revealed his plan to StarBiz reporter in general if he won the bid to own Proton. You can refer to complete excerpts as per below.
What are your plans for Proton?
Besides the increased utilisation of the Tanjung Malim plant, Proton needs to transform itself to be a global player, and I believe the upcoming model codenamed “P3-21A” will be the global car that will transform Proton's DNA.
The car will be a completely different car with better material and design coupled with modern features. At the same time, we cannot price the car very high. One thing is for sure, Proton's DNA will shift to a higher gear with the plans in place.
I hope to do a lot more tie-ups with other brands, as Malaysia today has a lot of capacity, with more collaborations and on a multi-franchise business model, it would be easier to control the local automotive industry.
We need to re-look the export markets for Proton, as previous strategies have been targeting smaller markets. Potential countries we need to look at are China, Iran, India and the Asean countries.
The potential engine collaboration with Mitsubishi Motors Corp (MMC) is great whereby it reduces Proton's investment of producing a new engine to only RM600mil from a projected cost of RM1.7bil to RM2bil. Mitsubishi needs only 100,000 engines annually, and we came in as a perfect partner due to the volume Proton can take, coupled with the strategic location of Malaysia whereby it is not prone to natural disasters, like Japan and Thailand.
Not only that, we have a whole ecosystem of engine development in Malaysia. While an engine block could stay for 20 years, the cylinder heads and the engine management system are major improvements that we can make to increase the efficiency of the engines.
There will be more tie-ups as MMC is also keen to share its electric vehicle mechanism with Proton.
While the Hawtai collaboration presents a good opportunity for Proton to write back some of its investments on model development.
The fully amortised models that we have developed like the Waja and Exora, we can sell these designs to Hawtai as it lacks the models while it invested about RM3bil in an automotive plant.
If I can find a second home for these sunken investments in the form of the models that we have developed and amortised, it will provide another stream of money for Proton.
What do you think of Proton's current model line-up?
The present model line-up is an attempt to correct the past mistakes, like the introduction of the multi-purpose vehicle, the Exora. Despite its late entry into the market, it is still better than never, and now the present line-up is more reflective of market demand.
Do you think privatisation is the way?
I think I will take it private if you ask me what I am going to do, because you have to restructure the whole organisation.
To me, in the car industry, especially when you are producing economical class vehicles, you can't go for high profit and huge margins with low production. We are competing in a high-production low-price segment, where margin is very competitive and investment cost would be the key.
If you have a small volume, you would not have the capacity to amortise your development cost, which as a ballpark figure stands at about RM600mil to RM700mil per model, and this is only the investment cost for the body and engineering excluding the investments for engine.
How can Proton be restructured?
Proton can be restructured through strategic business units (SBUs), which would be easier for the group to look for talents, whereby we would seek experts in their specific field like manufacturing, marketing and engineering. It would be a lot easier to find a chief to handle the daily operations.
These SBUs could then be engaged by third parties to do jobs not exclusive to Proton, for example the manufacturing plant in Tanjung Malim. Proton can raise its utilisation rate by having tie-ups with other brands to assemble or manufacture their products.
I know the business. Contrary to what some might say ... that Proton needs a global OEM to turn the company around, Proton is essentially a brand with Asian roots.
How would it fit into the portfolio of a global OEM with its collaborations with MMC and other joint ventures?
It would clash with the interest of Proton whereby OEMs like MMC would not be willing to collaborate further as they would run the risk of exposing trade secrets to third parties in the form of another global OEM in the picture.
Interestingly, it has been posted at paultang.org with additional statement.
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What do you think about Proton's future and Nadzmi's future after reading this? Well, we do not know.
As for Proton, these feedback from Nadzmi does not give any new strategy. In fact, SBUs idea has been suggested for Proton since last year. Generally, this management buy-out means continue the business as usual while having few cost reduction and re-structuring activities as usually happened to newly-owned company. At certain level, Proton relationship with Group Lotus might be at stake due to 'additional' statement posted at paultan.org. I am wondering whether the statement was coming from him, because he can do the 'cut-off' now since he is the current Chairman, right?
As for Nadzmi, if the management buy-out is a success, he can easily get the fund form the banks (foreign or local). It is not difficult to get funding from the banks. Why? Because they will make money either if Nadzmi's plan fail or success. If success, they got their money back with interest. If fail, bank can sell ('lelong') Proton (one and only auto company with RND capabilities in ASEAN region) to third parties with high return easily! Worst case, if Nadzmi lose his bid for buy-out, his chairman position will be taken by someone else, either from DRB-HICOM group or NAZA.
Anyway, these interpretations are just another interpretations..
Courtesy information from StarBiz
5 January 2012 at 17:35
the same scenario when Malcolm Glazer take over Manchester United and make it as private entity. He buy Man U by borrowing heavily from finance institution and Man U was in debt with all these finance institution...