Driving the industry forward

It is obvious that Khazanah Holdings Bhd neither have the right attitude nor plan for industry driven corporations under its stable, even though it is a national car project. In the seven years that Khazanah as the single largest shareholder with 42% holdings of the corporation, they did not do substantial investment nor did they bring in the right people to develop where it was last left of.

In short. they were never interested.

Khazanah during PM ‘Flip-Flop’ Tun Abdullah Ahmad Badawi’s tenure a former merchant banker as the Chairman. They did not follow through the previous management’s strategic plans and initiatives. A good example the failure to follow through projects that have been proven successful and profitable such as ‘Waja’, the first indigenous Malaysian car.

Proton Waja: Launched in 2000

Proton under Dato’ Mohamed Azlan Hashim between 2004 and 2009 also failed to develop the peripheral and supporting industries, even though they had the chance and reason to do so. In fact, under Azlan’s watch Proton sold off the Italian motorcycle maker MV Agusta for a token one Euro to Gevi Spa, which till present day became the most scandalous GLC asset-stripping exercise.

Proton actually digressed under Khazanah.

Except to start a hybrid engine program, Khazanah did  not put any additional capital into the national car project. In fact, there was not enough funds for research and development, so much so that Proton could not develop any new models. Proton actually went back to car ‘re-badge’.

This is not odd even though they are the single largest shareholder, they did not have anyone on board at board level. For that, they never looked into invoking any new technologies into their products.As a result, Proton lost out to its closest competitors. Coupled with the ‘open policy’ of bringing in streams of new imports and CKD brands, Proton even lost the command of the local market.

It is not surprise that Proton only manage to export 10,000 units annually. It is a shameful figure especially after more than 25 years, this level is not what ‘Father of Industrialised Malaysia’ Tun Dr Mahathir Mohamad hoped Proton to be.

What is displeasure to many is that without strong boardroom leadership, Proton has been seen as not charting its way forward. Not only Proton did not pursue serious collaboration with technology providers from the known brands, they also failed to capitalized on technology that some local companies managed to develop. Case in point is Petronas. Its partnership and collaboration into the Formula One since 1999 with Sauber, later with Williams and now with Brawn, the oil company engineers managed to develop a 1600cc engine. Proton not only did not capitalize on this work and development of the engine project, they did not attempt to utilize this engine into its future models.

One of the desired direct offset from the development of the automotive industry via Proton is the vendor development program. This is one program which Proton could help Bumiputra businesses grasp the technology driven SME/Is. However, since Proton growth itself is not encouraging, then the vendor development program especially for Bumiputra vendors has not been very active. Moreover, when the export of Proton is not at the level where it can promote the growth of the spin-offs.

Proton needs a new ‘driver’. One of the more active proponent to drive Proton and the Malaysian automotive industry forward is DRB Hicom Group. So far, they have proven to assemble leading marks such as Mercedes Benz, VW, Suzuki, Isuzu and the distribution of brands such as Audi. They also developed a chain of distribution and after sales services for brands under Proton.

It is not about a carmaker as a group of companies. It is about the automotive industry as a whole. The continuous production of Proton ensured that over 300 Malaysian vendors develop the entire supply chain and component manufacturing. The whole program is about capacity building.

DRB Hicom’s experience in the whole supply chain system in their complex in Peramu Jaya, Pekan is their strong testimony. Over 2,500 Malaysians are employed and they even developed a program to continuously develop the right workforce talents. They incepted an automotive college across from the main plants and by next year, they hope to be upgraded to university college status offering end-to-end diploma programs.

DRB Hicom’s management team is of very capable people. They have proven themselves, especially the ability to work with the  VWAG Group. Now, they are ready to lead a production concern. Especially with the ready strong collaboration with VWAG Group.

The plan is to invoke the technology from VWAG and develop new products. Then, Proton will be staged for an export market. This will automatically create the synergy for the capacity building, which include vendor development program.

Industry sources believed that with additional fresh capital and technology injection, Proton could really drive the Malaysian automotive industry. When they manage to significantly increase production, then they should be ready to invest into molds and die. The reliance on import of many of the key parts would be reduced. The synergy of the Shah Alam, Tanjung Malim and Pekan plants wonld prepare Proton for the capacity of a strong export market.

Proton being part of DRB Hicom would also be eventually be a boon for the defense industry. That is the strategic intent which would reduce the reliance of imported military vehicles. This was one of the strategic spin-offs when the national car project was started back in 1983.

Needless to mention that Tan Sri Syed Mokhtar Al Bukhary is a towering Malay entrepreneur, who has manage to grow his business and deliver some of the task lead upon him which is strategic in nature. Port of Tanjung Pelepas is one of gleaming example of the Al Bukhary Group success story.

The strategic intent for the nation is more valuable than Khazanah relinquishing their investment. Proton as an industrial pride of the nation and the consideration should also be centered around which party can take the automotive manufacturer to a higher position.

Federal Government could also fully utilise DRB Hicom-Proton to be the umbrella and catalyst of SME/Is, especially the 1,100 Bumiputra firms with huge potential to be driven into major industry players within the next five years. It is TERAJU grand plan for the Bumiputra Commerce and Industrial Community (BCIC), realising the ‘meritocracy’ within the ambit of New Economic Policy, as envisaged by Prime Minister Dato’ Seri Mohd. Najib Tun Razak.

DRB Hicom’s annual turnover for 2010 is RM 6,314 million and EBITDA is RM 657.9 million where else Proton’s annual turnover the same corresponding year is RM 8,226 million and EBITDA is RM 260.9 million. The aggregated turnover for the group if Proton were to be under DRB Hicom stands at over RM 14.5 billion.

Tun Dr Mahathir Mohamad’s original nucleus group of companies to embark into high technology via Hicom Group of companies back in 1984 where Proton was born in August 1985 and eventually the full peripherals for the automotive industry via DRB Hicom followed suit. That made the national car project formidable with the whole nine yards, upstream and downstream. So, the opportunity for DRB Hicom to have Proton as part of the group would simply be just like, ‘sireh pulang ke gnggang‘.

There is definitely a synergy in automobile industry from DRB Hicom taking the lead and Proton being part of the bigger group of automotive conglomerate to progress and bringing the Malaysian car industry upwards.