Commentary Economics Politics

Nationalism will not fix Proton’s power window

mahathir proton

TheMole
Written by TheMole

By Salahuddin Hisham

 May 30, 2017

TUN Dr Mahathir Mohamad has been running a tantrum since the announcement that Geely of China is taking over a minority 49.9 per cent equity in  Proton.

 The tie-up should pump the needed money for R&D and improve manufacturing as happened at Volvo. It offers access to expertise, technological, and China’s market. If all comes together, the smaller 50.1 per cent equity will yield higher return to Tan Sri Syed Mokhtar Al-Bukhary’s DRB Hicom than a larger equity with third placing for sales in the local market.

 It would mean Proton will have to rely on foreign management and disciplining to whip it into a bonafide manufacturing outfit with international standard practises.

Salahuddin Hisham was involved in various financial markets but has since, turned political and online.

The idea of seeking foreign management and expertise may have pricked on Dr Mahathir’s Malay nationalistic pride.

 The former prime minister cannot seem to accept the reality that the underlying reason for Proton’s failure was the lackadaisical management or interference on management.

The power window problem since the first model, Proton Saga, is only one but it is a manifestation of a deeper problem. The family Proton Iswara bought in 2002 faced the same problem.

 Maybe it is a design problem, but why could it not get rectified. If it is not design or management, there is the dependent mentality prevailing among Proton vendors.

 They see it as their god-given right to be helped, but not delivering the parts according to expected quality. Forget about improving their product without contract commitment from Proton. Strangely, the same vendor could deliver as requested and cheaper to the Japanese run Perodua.

 Cronyism and favouritism may have made certain vendor untouchable to management.    

 Dr Mahathir’s reaction is to repeat his favourite political line of “jual negara” (selling the country) whenever he is on the mode to throw out another sitting Prime Minister. In addition to crying wolf, he gets  melancholic and seek public sympathy with the line that his child was sold away.

 No doubt about it – Proton was his brainchild.

 However, he was Chairman of Proton when negotiations with Geely began in 2014. His deep involvement in Proton is legendary that it is unlikely he is not aware of the negotiations and may have even contributed to it. The father himself wanted to sell off the child.

 Behind all the drama to politicise the sales to Geely, Dr Mahathir’s statement yesterday highlighted the crux of his unhappiness. He lamented the loss of Malay nationalism and waning Malay pride.

 For years, he has been berating, in his key note speeches at the Umno General Assembly, of the need for Malays to work hard, be attentive and focused. He has always highlighted Proton as a glowing example that, given a chance, Malays can do it.

 The idea of Proton was indeed a noble cause. Car ownership then was a measure of family wealth. So Proton would produce cars affordable to Malaysians.

 There on, the car industry was to spearhead the industrial master plan for the country. It was hoped that supporting industries could be created out of Proton. As Proton grew bigger and gained market abroad, supporting industries would grow along and pursue market abroad other than Proton.

 Dr Mahathir emulated the industrial development models of Japan and South Korea. Unlike Malaysia with car sales only 80,000 a year, the two carmakers of South Korea – Hyundai and Kia – could sell 1.2 million cars domestically. That was not nothing because their global sales  stood at 7.88 million cars.

This was one of the concerns of critics of Proton in the early days. The Malaysian market was too small to sustain a national car project and needed to rely on the export market. The scepticism then was with the Malaysian ability to penetrate overseas market.

 With almost zero overseas market, Proton was fully reliant on the domestic market. Unlike the Korean carmakers’ ability to ride on the nationalistic fervour to dominate 80 per cent of the local market, Proton was now left with only 15 per cent of Malaysia’s domestic market.

 Since leaving office, Dr Mahathir has been complaining about the opening up of the local car market. He insists the old practices of protectionism through tariffs and approved permits on imports should be continued for the sake of Proton.

 Unfortunately, that would be untenable. The benefits of opening up market for Malaysian products abroad through bilateral or multilateral free trade agreements far outweigh the protection of Proton. Malaysia loses bargaining power by overly defending Proton.

Defend,  trade officials did. However, opening up of market was inevitable. Even South Korea has opened up to foreign cars, and the dominance of Hyundai and Kia reduced from 80 per to 60 per cent.

For Proton to succeed, it has to think beyond protectionist practices. It has to go back to the basics of delivering a good product and complementing with services. The power window has to work and when broken, can be fixed.

 At a time Dr Mahathir was resting on his laurel and prematurely gloating  that Malays  also “can do”, he had ignored the inevitable evolution. Automotive technology keeps moving forward and cars need to be improved upon constantly.

The sense of national obligations can move Malaysians to buy Proton but in the final analysis, consumers crave for quality and are willing to pay for more expensive imports for lesser hustle.

 Proton was lulled by the market protection provided by the government, and failed to react proactively.

 When Perodua came into the picture, it did not take long for the more disciplined outfit under Japanese management to outshone Proton.

From the inferior segment of small cars under 1,000 cc, Perodua constantly redesigned its models to suit current trends while maintaining product identity. It was more adept at identifying potential, and more importantly, profiting from it.

 Proton claimed that they managed to save RM18 billion for the country but the excessive tax collected from taxpayers to protect Proton over the years could be in the many multiples.

 Defenders of Proton are still arguing on the aspirations, potential and dreams. But, 30 years down the road, it is time to look at the track record and deliverables.

 Dr Mahathir has to face the reality that the world has changed and the economic model he used to develop Proton does not work anymore.

Nationalism can inspire, motivate and drive the country to seek the identity and success in economics, business, and technology. But that is as far as nationalism can go.

After endless assistance and subsidies, it will only sacrifice the country’s resources meant for other more productive purposes.  No amount of nationalism can tolerate tax payers money going down a bottomless pit.

 Sooner or later, nationalism needs to come to terms with the market place.

Know any good mechanic for the power window?

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TheMole

TheMole