I Was Planning To Write That This Was A Good Time To Raise GLC Staff Pay When...

I was planning to write about this being the best time for the government to raise GLC pay when I read Khazanah's backing a 100% pay hike for TNB's boss instead. On the back of this rubbish, as well as TNB's suppression of staff pay increases at a level likely below inflation rate this year, my proposal would probably be pretty much a wasted effort.

Oh well, since I was planning anyway...

There is one unifying reason why many of the best Malaysian talents leave to work and eventually live in another country, what's called the 'brain drain'. No, it is not because of the DEB, as Malays account for a sizable number of those leaving these days, many to the Middle East and interestingly a majority emigrating to Australia are now Malays.

The reason is because Malaysian pay sucks. I mean seriously, Malaysian pay, for the same quality of talent, is not enough to make the best Malaysian professionals loyal to the nation! The reason for this is because GLC pay has been and continue to be suppressed year-on-year, despite the increased need for quality in these firms as they mature.

As GLC's in Malaysia so dominate the employment scene, the pay rate for THE ENTIRE PRIVATE SECTOR in Malaysia is poor relative to the region! This is as non-GLC's, even MNC's, don't really need to pay much more to secure the best talent available (what's left?) in the country.

The pathetic Malaysian pay is one reason why many work in Singapore at local pay rates - the pay in purchasing power terms is generally higher even before converting. This is also the reason why Malaysian medical grads prefer to stay on in the UK until they become specialists as the money only rolls in when you're a specialist back home!

GLC's tend to be all nationalist when challenged about this, citing 'national service' for instance. The problem is, how can a professional reasonably perform 'national service' when he or she's forced to make ends meet with the pathetic pay the GLC's continue to pay.

The clever 1/3 economist running around on the 4th floor is sure to say that raising GLC pay by say 25-30% a year for 3 years, the minimum increment needed for middle-management downwards, would be inflationary. However, as Pak Lah has stuffed up inflation control in the country this year anyway, why don't they do something right for a change!

Then maybe we can start reigning in the 'brain drain' at long last, as MNC's, the rest of the private sector and perhaps even the civil service are forced to follow suit.

And if the GLC's complain about the salary impact on their P&L, ask them to cut the CEO and CFO salaries first before kicking out all the expats and replacing them with returning talent. They're paying some expats in GLC 7-10X what they would pay a local currently anyway... have a heart for us Malaysians... please...?

When A Proton Loses Its Charge...

Let's have a conversation about something that I've been keeping silent about for a while now, the snow-balling disaster at Proton. Silence seemed a wiser course of action knowing that my last long discourse on this matter was when it seemed a local entity with a credible leadership was being considered to replace the disasterous Azlan Hashim regime at Proton.

It was hoping that the national committee on this matter, led by the DPM Dato' Najib Tun Razak no less, was on the right track towards appointing an entity to guide Proton to a steadier footing, as the better option seemed... better... whilst the lesser one's main problem was not incompetence, but rather its sleazier self-serving owners. However, since such matters were in the press, some strange things have occured...

Firstly, when Proton's performance continued to dive, quarter by quarter, through to the poor final full year result posted recently, Azlan Hashim's Proton management acknowledged shortcomings due to 'need for a partner' or 'tough market environment' or 'high cost of steel'. These of course were excuses and nothing more, as the Proton management failed to acknowledge that:

1. In place of a proper new product driven marketing strategy, Proton's management had embarked on the classic marketing fool's option of cutting the price of its cars, with no understanding of the price elasticity, or lack thereof, for the higher volumes to cover the lower unit margins.
2. Poor manufacturing strategy as Proton continued to make cars people didn't want, including the Wira, which was supposed to have ceased production long ago, resulting in an increasing inventory problem in Proton. These high and rising investories was what made increasing material cost so much more expensive to Proton.
3. Both the poor manufacturing and marketing tactics were due to a lack of undestanding by Azlan's management of the fundamental change in the car market, not just in Malaysia, but globally. Trends like a shift to smaller cars to save fuel, as anticipated by the former oil-man that was previously running Proton leading to the Savvy being developed. Azlan Hashim's leadership was just directionless in this regard.

Then, the issue of the collapse of the 2nd hand car market came up, with first Proton, then automotive bodies, bandying out the unworkable idea of a minimum trade-in value for used cars to kick-start the market. In many discussions, it was said that the National Automotive Policy (NAP) was too successful in reducing car prices, leading to this problem. Very few commentators in the mainstream media hinted that the issue was due to the failure of the NAP! How? In order of events:

1. When the NAP was launched with much fanfare, the first few days was embarassing for the 4th Floor, who claimed it as an achievement, and Ethos Consulting, which helped produce this shallowest of policies. This was because the NAP was expected to result in the market drastically adjusting car prices downwards. The problem was, it did not! The market players just did not see the NAP giving much incentive to reduce the price of cars!
2. So, in panic, someone, the 4th floor? Ethos Consulting? Someone convinced the DPM to come out to publicly admonish the local car manufacturers for not dropping prices, then arm-twisted the GLC's to cut the price of Protons and Peroduas. So, the drop in car prices was not due to the NAP, but due to an artificial forcing of price cuts by the government.
3. Whilst the arm-twisting, rather than the NAP, did get car prices to drop more significantly, it also resulted other effects. It spooked the banks. How could the banks set interest rates for car loans that would effectively reflect the risk of government price intervention in the car market? Raise the interest rates on car loans!
4. In addition, the forcing down of new car prices spooked the second hand car market also into a price shift downwards, a little lower than a market reaction, again, due to the artificial forcing down of new car prices.
5. Ah... but now comes the killer blow. The banks, seeing the second-hand car market declining in prospect even more than the new car market, made it more difficult to get and increased interest rates for car loans to buy second hand cars.
6. The banks' reaction led to a further collapse of the second-hand car market to where it is today.

So, if you follow the chain events back to the root cause, the reason for the collapse in the second-hand car market is the artificial lower car pricing forced by the government onto the car producers like Proton and Perodua due to the panic felt by the government's young inexperienced Oxbridge advisors when their policy didn't have any significant impact to the local market, on which they had also mistakenly over-focussed the policy on!

Why have we not heard condemnation or any sackings of the authors of the NAP for partly destorying Malaysia's car market, and potentially Proton too!

In the meantime, Azlan Hashim had to try and sell a success story for Proton seeing as his contract was due for renewal. He widely publicised the story of Proton's entry into Indonesia, with Proton also securing a deal to supply Wira's to a major taxi fleet. Maybe some clarification here:

1. Proton's entry to Indonesia had been planned for at least 5 years, but had been delayed for at least a year by Azlan's management.
2. Selling Wiras to the taxi fleet was a mistake as it now risks branding Proton as a car producer of outmoded technology in a key market. It would have been better if they supplied at least Waja's, with its large boot and Lotus handling as key selling points.
3. The selling of the Wiras had an ulterior motive, basically as a desparate measure to remove huge stocks of Wiras that had been over-produced beyond its earlier planned line discontinuation.
4. Indonesia was only one of the key foreign markets Proton had planned to enter up to 2-3 years ago. What happened to the deal with Iran? Did Renault really take it from us first or did Azlan stop talking to the Iranians so that Proton can still be sold to American companies like GM?

A more recent tragic read I found in the mainstream press was, after the poor full year performance, Azlan Hashim had the temerity to suggest that he needed to select a new team to lead Proton, as Syed Azlan was probably unsuitable as a CEO and they needed a top class CFO! He seems to have forgotten that:

1. Azlan Hashim was responsible for compelling Tunku Mahaleel, which like or not, was at least competent, from continuing to be Proton's CEO.
2. Azlan Hashim was responsible for the resignation (some say in disgust) of the reputable CFO of Proton, Mr. Tan Seng Lee. One suspects this is due to Tan's protesting of book-keeping around MV Agusta's disposal, as soon after he left, MV Agusta was sold for 1 Euro, with no consultation with minority shareholders and justified by dubious accounting.
3. Azlan Hashim was the one who chose Syed Zainal to be the next CEO, by-passing a senior Proton person with superior operational skills even as a choice, Dato' Kisai Rahmat.
4. Azlan Hashim made it untenable for Kisai Rahmat to stay in Proton. This is as Kisai saw his efforts for many years in Proton being put to waste and squandered by Azlan.
5. Azlan Hashim also has singularly failed to attract the appropriate leaders to serve in Proton under his leadership, despite being in sole control for some 2 years now.
6. Finally, I'm not even sure if Azlan's contract as Chairman has been renewed - the old contract lapsed some months ago!

The litany of poor personnel decisions by Azlan Hashim in the past shows that he not only is not sufficiently competent to choose the next leaders for Proton, he doesn't deserve to even be retained in his own position in Proton. So is he being delusional or arrogant or just ignorant when he speaks of replacing key personnel at Proton?

And today, I picked up news that got me writting again, about how Khazanah, in a panic, is about to sell control of Proton's crown jewels, whatever remains of its intrinsic value, at a song to a company with VW and Sime Darby in the driving seat. Sime Darby? I thought Sime Darby management was too busy with Synergy Drive to bother with Proton!

What has happened to the plans on the DPM's table some months ago? Is Khazanah really that desparate that they will act despite the DPM's wishes?

As the PM will be busy getting married this weekend, and as I do not trust the PM's minders, I believe only the DPM can address the Proton issue now. I hope he's at least being given the right advice - that Proton needs an new local entity to assist it in any engagement with a foreign partner - Azlan has just made Proton too weak to do it on its own.

The entity I prefer to take up Proton's equity is one led by a leader with a proven turn-around and national service record. The entity also has strong synergies with Proton. The choice was obvious many months ago... and certainly not this VW/Sime Darby nonsense, or some crippled plodding American has-been company that also shares the news.

Dato' Najib... if you or your people deem my writing here worthy, please save Proton from the ill action of Azlan and Khazanah... the rakyat should get its investment's worth... pleas remember Proton is more than it appears to be...

Crunch Points Of 2007, With Q1 Leading To Initial Conclusions

I had a gathering with a few friends on New Year's Day to discuss the potential crunch areas facing the nation this year, 2007. It was partly in reaction to the on-going number of issues, many unresolved till today, and many more arising continuously, almost swamping us to the point where many have stopped caring. We thought it was important to focus on the key issues that may place the nation in danger, in the eve of our 50th Merdeka celebrations.

By far the most critical item was agreed as being the impending USFTA. The group believed this was the biggest issue, though surprisingly the issue the rakyat were least aware of, as:

1. If miss-handled, it had the potential of being the most damaging agreement the country has ever agreed upon since independence, to the risk of even sacrificing out sovereign rights to the US, a power that has shown itself to be selfish and unsympathetic to other, closer, past partners.
2. The recent JapanFTA with Malaysia has indicated a degree of incompetence of the current government in concluding such agreements, resulting in an agreement clearly NOT in Malaysia's favour, when a better agreement would have been easy as Japan is a country that has a long-standing, cooperative and benign relationship with us.
3. Worryingly, there has recently been anecdotal evidence from the behaviour of MITI, especially the long serving minister, that the Japan FTA was not signed with the ministry's full endorsement, but an agreement was forced by 'other forces', much as being seen recently for the USFTA.

Compared to the USFTA, the other 2 'crunch' events seen then are more benign, but are themselves major events were it not for the presence of the USFTA. The second highest ranked issue for my part was Proton, or rather what the government was going to do about it.

The Proton issue is a long-standing one, but is critical in demonstrating the seriousness of this administration in establishing good corporate governance and the building of a progressive Malaysia. Continued misshandling of Proton, by rewarding its ownership to the wrong parties, or denying its success by turning it into a second-rate subsidiary of a foreign rival, would be seen as confirming that corporate corruption and the culture of mediocrity is alive an well in Malaysia.

As mentioned on occassion by this blogger, my book of writings on Proton is coming along nicely, with materiel from former leaders and internal sources from bidding companies, hopefully, shedding more light to the whole mess so far, though we hope (naively?) nevertheless leading to a good outcome.

Finally, the issue we thought would be of interest moving later into the year was Synergy Drive and the amalgamation, and re-allocation (as there must be), of the assets of the major Plantation GLCs in the country. Synergy Drive is seen as a larger and potentially bigger test case of the extent of corporate corruption and mismanagement has progressed than Proton.

Of particular additional interest also is the way the merger will change the power-structure in Malaysia's corporate landscape, with the plantation companies wielding so much power even whilst apart, second only to Petronas in the GLC ranks. Will our plantations continue to be steered by Nationalists like those in PNB, with Nation-Building agendas, or new-age Economic Hit-men like many in Khazanah, with KPI's and 'loose change' on their minds... and little else?

We are coming into the end of Q1 2007, and I believe the above to still be pertinent, so many may ask, where is the 9MP and Singapore's Johor Economic Rape (SJER), now better known as the IDR (Iskandar Duped Repeatedly). Well, I believe the 9MP to be nothing more than a poor man's PR trick (I mean really, do you remember the 8th, 7th, 6th... MPs?). And the IDP, the biggest real-estate auction in history, deserves a separate category altogether...

As for the coming elections... well, I think the handling of USFTA, Proton and Synergy Drive should probably be guiding lights for Young Professional voters in Malaysia on how they cast their votes in any case. On these issues we can decide if the government is guiding us and our country where we think we deserve to be driven, in a decent Proton running along in 'synergy' with our nature and desires, and without some obnoxious American as a backseat driver!

Mari Kita Sama-Sama Menasihati YAB Sebelum Ekonomi Malaysia Jahanam Lagi

Sejurus keluar bahan tulisan Yang Angkuh Bongkak (YAB) Khairy Jamaluddin di halaman Mingguan Malaysia tanggal 25 Feb 2007, mengetengahkan pendapat yang ekonomi kita memang semakin kencang hasil usaha kerajaan pimpinan bapa mertuanya, harga saham Bursa Malaysia turun menjunam pada minggu berikutnya.

Ini bukanlah petanda kehebatan kata-kata YAB Khairy sehingga pelabur Bursa boleh ditakutkan oleh tindak-tanduk beliau. Hanya sekadar menunjukkan yang mungkin beliau belum cukup ahli dalam hal ekonomi untuk memberi pendapat yang sah boleh diterima.

Kalaulah YAB benar-benar ahli dalam hal ekonomi, beliau pasti sedar yang sebenarnya melonjak naiknya Bursa Malaysia sebelum ini kerana pelabur jangka-masa pendek yang lari dari pasaran saham Thai telah mengalihkan wang mereka secara mendadak dari negara tersebut ke Malaysia. Pengalihan ini pun ternyata untuk jangkamasa singkat kerana saham kita sudah terlalu murah akibat kurang pelabur jangkamasa panjang baru di Malaysia dibandingkan negara-negara jiran.

Maka di manakah kesahihan pendapat YAB Khairy, apabila hujahnya yang ekonomi Malaysia kukuh berdasarkan analisa yang kurang jitu. Terlanjur pula beliau mempertahankan kenaikan harga minyak, tol dan sebagainya sebagai sah walaupun hasilnya rakyat mengalami keperitan secara mendadak.

Yang membimbangkan adalah, dalam kegagalan usaha YAB Khairy menunjukkan keahlian dalam hal ekonomi, apabila beliau sebenarnya tiada berkemampuan besar, kata-katanya membawa risiko seperti:

1. Menimbulkan tanda-tanya tentang kesahihan pendapatnya yang betul, seperti apabila beliau menyatakan betapa perlunya kita membantah perjanjian perdagangan bebas dengan Amerika Syarikat (USTFA). Ini betul, tetapi kata-kata YAB Khairy tidak membantu sekiranya beliau dilihat pincang keahlian ekonominya.


2. Tindak-tanduk YAB Khairy mungkin menimbulkan tanda-tanya akan kebolehan generasinya untuk mewarisi tampuk kepimpinan negara kelak, kerana walaupun beliau tidak mewakili generasi beliau, mungkin ada yang berfikiran demikian.

Oleh itu, saya menyarankan kepada hamba-hamba Allah yang sudi, nasihatkanlah beliau untuk membaca dan belajar lebih lagi tentang hal ekonomi sebelum beraksi sebagai ahli.

Sebagai seorang yang disanjung kebijaksanaannya, YAB Khairy patut sedar yang walaupun beliau seorang pemegang ijazah Politik, Falsafah dan Ekonomi (PPE) dari Oxford, ini hanya ijazah Sarjana Muda yang mengajar 1/3 sahaja dari kandungan bidang Ekonomi yang ada pada kelulusan Ekonomi lain. Ijazah Sarjana beliau pula bukanlah dalam hal ekonomi.

Malangnya, pengalaman kerja YAB Khairy sebelum ini pun kebanyakannya dalam hal kewartawanan, dan dengar kata yang beliau diambil menjadi Pegawai Khas pun kerana kebolehannya untuk mengarang ucapan, bukannya kerana keupayaan dalam bidang ekonomi. YAB patut mengakui yang tugas-tugas beliau di ECM-Avenue pun sekadar dalam hal Perhubungan Awam (PR) semata-mata, jadi manalah sangat pengalaman bidang ekonominya.

Kalaulah pemain boneka utama negara a.k.a. Uncle Kali berupaya mengajar YAB Khairy, tak apalah juga. Tetapi memandangkan dalam hal penulisan dan kewartawanan pun YAB kelihatan lebih ahli dari Uncle Kali yang ternyata bukanlah seorang wartawan yang hebat, apalah sangat yang upaya diajar oleh Uncle kepada YAB?

Dalam keinsafan YAB Khairy, kami menasihatkan beliau membaca buku-buku tersebut untuk memahami apa itu ekonomi dan apakah asas pemikiran yang harus ada dalam usaha membangunkan negara:

Mungkin selesai itu, YAB Khairy akan berupaya membaca teks yang lebih rumit, sejurus itu menjadi lebih upaya untuk memberi pandangan tetang hal ekonomi. Namun, ada baiknya mungkin sekiranya beliau menasihati teman-temannya di Khazanah dan GLC-GLC untuk membaca buku-buku tersebut dan yang dibawah, selain mengarah dan mengherdik mereka dalam pelbagai hal lain:

Sekadar inilah keupayaan saya, untuk mengajukan nasihat sahaja. Adalah diharapkan mana-mana hamba Allah yang mengajukan saranan saya kepada YAB Khairy juga mengutarakan niat ikhlas saya. Sesungguhnya, adalah untuk kebaikan sejagat warga Melayu dan Malaysia yang kemampuan YAB dalam hal ekonomi ditingkatkan lagi dari kadar yang sedia-ada.

The Proton Saga: An Ongoing Example Of Analysis Gone Bad - Part 2, The "Insider"

I was innocently sharing my last write-up on Proton on the promuda circle (http://groups.yahoo.com/group/promuda_circle/) when I was challenged by a chap claiming to be an 'Insider' of the workings of Proton under Mahaleel through to today. I'm grateful of the challenge really as it allowed me to then clarify some typical armchair-critic analysis which have long bugged me.

I actually first clarified that I had never worked in Proton. In fact, I've never worked for a car company. Nevertheless, the irony is that I am at least as qualified as the majority of "experts" commenting on the car industry today, with the advantage that I've been working in an integrated industry (oil) for more than 9 years now, covering production, R&D and now economic optimisation and tactical planning.

So, when I comment, it may not be as an 'insider' or expert as some claim to be, but I'd like to think it is based on more than just "pure assumptions, both fact and fiction".

I'll present my response almost verbatim, so I hope you'll be able to read the questions in the original challenge clearly.

The Insider wondered w.r.t. my insinuation that VW was less interested in being partners with Proton after the 'mega-insider' Azlan Hashim sold MV Agusta for a dollar,"They (VW) are focussed in what they do, i.e. a car manufacturer, so why would want to go into the motorcycle business?"

Response: Mr Insider. As an 'insider', you should know that there is a lot of cross-polination between all vehicular industries. Yamaha for instance was and continues to be a partner to Toyota in many technical developments, including the Toyota's vaunted Twin-Cam technology. BMW also owns a Motorbike unit, with the unique 'duck' engine design. Saab's original parent make aircraft, and Renault used to make tanks!

Presence of a high-tech motorbike arm as part of an auto company's design pool adds to the overall breadth and depth of a company's design make-up. As such, MV Agusta is not just of value for its brands, but also for its own set of and capacity to further develop Intellectual Property (IP), including a very well reputed design studio, CRC.

How is this transferable to cars? Lets try just one example. Headlights. As an insider, you'd know the sort of IP that goes into headlight design. The fusion of beautiful aesthetics with safe, effective light distribution, power efficiency and all in a compact package? Well,headlights are just one of the 'simpler' items MV Agusta's design and tech could bring to a car company like Proton.

The full list is long...Similar to say how Yamaha pianos contributed to the Lexus' woodfinish... no item and contribution is too small to be discounted.

The real technology jewel for Proton I had always felt though was the potential of MV Agusta's engine tech - small engines with power outputs that could drive a small car... like the Savvy! I understand Lotus doesn't have this technology, hence I had always believed access to this tech could be achieved from MV Agusta. Again, the Toyota-Yamaha relationship comes to mind.

You would know of course that some Korean cars have their bodyworkdesigns done in Italy? Proton used to OWN its own Italian design house through MV Agusta(!), something the present Proton management didn't understand.

When the current Proton management demonstrated this lack of understanding by selling MV Agusta on the cheap (to a company that seems to have been able to continue to keep MV Agusta floating!), VW execs probably realised they were negotiating with incompetents...and pulled out...helped along the way by another offer on the table...

The Insider actually also said prior to that that,"VW's technological capabilities are way more advanced than many other OEM's."

Response: True. But no car company I know has dominance in auto technology. The field is just too diverse. So an assumption that Proton, humble little Proton, of course with Lotus in its stable, had nothing to offer VW is arrogant in the extreme. Of course, Proton had more to offer when it owned MV Agusta... Lets continue...

On my questioning why Wira production was not stopped, the Insider said,"Although I agree with you that they should have stopped the production of Wira, but this issue was there even before Mahaleelleft. So I don't think this point of yours of blaming the currentmanagement for this is valid."

Response: I disagree with you, as Mahaleel publicly announced that Wira's production was to cease when the Gen2 production was to normalise and ramp up beyond the initial roll-out, hence Mahaleel was always planning to kill the Wira, ergo, the current management are fully responsible for keeping the Wira alive past its life-cycle!

In addition, I find the idea of scapegoating Mahaleel repugnant and irrelevant. The guy is gone. Excusing any incompetency of the current management on him, rightly and wrongly, is hence morally repugnant when the current management could and should take responsibility in the now!

The Insider also said on the Wira,"...Perodua are successfully doing what you(and me!) say shouldn't be done (killing Wira). They are still producing Kancils and Kelisas, two cars in the same segment, yetmaking a hefty profit from it..."

Response: I disagree. I think Kancil is and has always been a cheapo car.Kelisa is actually quite a bit better than Kancil.

The difference is not too subtle, like say between an Iswara and Gen2. These two cars both are also in about the same class in size and have close weight to power ratios, but they're for different markets.

The Insider said,"Again, poor quality vendor issue originated even during Mahaleel's era. He was the head honcho for about 8 years if I'm not mistaken, and it was during this time that it all went wrong. The new management took over about a year or so ago."

Response: As I said, I find excuses like this morally repugnant and excuses that 'the new guys need more time' smacks of the Lah-ism desease of procrastination. This is not the way to run a business.

I make no excuses for Mahaleel, and agreed, he could have tackled thequality problems sooner. However, I find it interesting that the government, Khazanah and Proton's board agreed he had to go at about the same time he began to negotiate and action the ranking of vendors, with the intention of dismissing poor quality vendors (many probably linked to the establishment) and replacing them even with foreign parts providers if needed to drive the car quality issue forward.

So, on the on-going poor Proton quality due to poor vendor quality, who's really to blame? Proton's current management holds the bag, though I suspect with Khazanah and the government sharing responsibility also for continuing to hamstring Proton.

The Insider suprisingly raised the standard song and dance questions why MVAgusta was bought. It was bought at a premium, it was making loses, it continued to make loses, yadayadayada...

Response: Well I believe I gave some good reasons above, and it is a reality in business that you buy above market price for control of a company, even unprofitable ones, as those may well still hold assets.

On MV Agusta continuing to make losses, this is where I can give you a lesson in one aspect of an integrated business. In major integrated business, there is such a concept as having aloss-leader. A loss-leader is there not to make money, but actually delivers value to the entire enterprise as a whole whilst it is making a loss. MV Agusta would have fit this role in Proton, given time, similar to say how Bugatti does for VW, or Xerox PARC does for Xerox in the imaging industry.

Interestingly, Lotus and MV Agusta was about to implement a branding and distribution cross-sharing plan which would have brought them closer to the black before MV Agusta was sold (the BBC reported this when the MV Agusta sale was announced).

Maybe the current Proton management wasn't interested? Maybe they didn't get it? Or maybe they just needed a scapegoat for incompetencies to that date?

The Insider said,"I personally know of and experienced an instance whereabout half a Billion ringgit was literally wiped out, due tounprofessional decission making by the previous management."

Sorry mate, but we're professionals. Please substantiate this,otherwise, even if you are an insider, this is hearsay.

Besides, didn't the SC declare once that losses of such a sizewas 'acceptable'? LOL

But seriously, even if this was true, management, even good ones,make mistakes all the time. Good management though on the balance make more good/excellent major decisions more times than poor/bad ones, with business growth an indicator of competency. Mahaleel consistently delivered growth. The current management doesn't seem to know the concept... we're lucky Proton's still in the black!

The Insider then said,"As far as I am aware of, the current management are really struggling to 'stablise the ship' due to the really low cashreserve of Proton."

Response: Sorry, but this is bull. Proton Group recorded a CASH balance of~RM1.6BILLION in 31 March 2006's and ~RM2.4BILLION in the year before's yearly audited accounts. If it no longer has this money (and the drop between the 2 end of years followed departure of Mahaleel in July 2006), the current management certainly can't blame the previous guy!

How can an 'insider' not know what is public knowledge? Here is the link to explore this public record:

http://www.bursamalaysia.com/website/bm/listed_companies/company_announcements/annual_audited_accounts/index.jsp

Proton also self financed the Tanjung Malim plant and the Shah Alam plant is fully paid-up and is a real-estate goldmine that has neverbeen re-valued since the 80's! If Proton was cash strapped, any bank would take the Shah Alam plant as security for a few hundred million revolving credit. It would appear you have been made wrongly aware.

The Insider also excused Proton's current poor performance by saying the scenario for Proton now is worse than in the 1999 crisis, when Proton was still able to make a profit.

Response: Hello, competent management is able to make money or make the most of even poor situations. We have car companies in Brazil, with double digit inflation for decades on end, making money for god sakes! If the current Proton management can't handle the current business environment, its not the fault of the environment, they just don't have the competency to handle it!

The Insider commented,"I don't know how much Proton was involved in the NAP,but I would think it would be quite a small input due to the lesserfavourability to Proton compared to the pre-NAP era."

Response: I don't really understand your comment. How can Malaysia's largest car producer not be engaged in developing the NAP? It doesn't make sense.

So, you say even after Mahaleel was dismissed, the new management, supposedly backed by Khazanah, was not 'favoured' to give input to the NAP, commissioned by the government that make up the board of Khazanah? No, this doesn't make sense.

As I said, Proton's management, if not engaged, then were weak by not forcing engagement, and if it was engaged, were idiots if the NAP as it stands was the result!

On my claim that the stretch Waja was a debacle falling squarely on the shoulders of Proton Chairman Dato' Azlan Hashim, the Insider said,"...if you are an insider, or even remotely connected to the automotive industry, you should know that to come up with a new car model (albeit by only modifying a previous model) takes quite a considerable amount of time. The conceptual design phase, by doing crash analysis, packaging, etc, then prototypetesting, mule cars and what have you, and then coming up with the final design and finding suppliers, creating tooling for themanfacturing process etc, there are many things that need to besorted out, and I'm not talking about days or weeks here. Were looking at a time frame of at least a year."

Response: As I admitted, I'm not an insider. Though I would like to correct you in that I recall the MIT Motor Vehicle Research Institute's study in the 80'son Japanese lean production actually figured that the Japanese could potentially build new designs through to production in 6 months...that was 2 decades ago, before multiple use of platforms became vogue and so refined.

Renault is planning to launch what, 20 models in 5years? Something like that.

I'm not an expert. However, I don't consider the stretch Waja a new car, or indeed even a challenge to design such as to take as long as you stipulate above. Most of the hard engineering was done with the original car. I'm not an insider here, but I would have thought all you needed to design a stretch of an existing car design was figure out how far you could stretch the car before the engineering failed - you know on the body, suspension stress, torque distribution along the axle, etc. I'm not an expert though ;-)...

The Insider then said,"Although I was never involved in the Waja stretch project, I would think that when Mahaleel left, the project was already on going, maybe nearing towards completion..."

Response: This scapegoating of Mahaleel (again) is tiring. As you say you weren't involved in the Waja stretch, so the question is open. However, Azlan took (misplaced) personal pride in unveiling it - if it was a bad choice to develop it, a competent manager would have killed it as the cost of marketing and plant re-config step etc could be saved.

And really, based on what I mentioned above about the stretch not being a new car, assuming you're an engineer (like I am - I don't make cars, but even designing Xylene splitters aren't trivial), you'd know that stretching the Waja doesn't take THAT much engineering work...

On the Insider's comment,"As an ex-insider to Proton, I would have to say that the best thing to happen to Proton was the departure of Mahaleel.Regarding the new management, it is never an overnight quick fix whenyou are already in deep shit."

Response: Again, I was never defending Mahaleel, but his performance vs the current management was just a useful counter-point.

I would have expected that the good Chairman Dato' Azlan Hashim knew how to be more competent when he chose Mahaleel to be dismissed, else, why dismiss him. Evidently, he is not, and in fact, is far worse!

I also disagree that Proton was all rot under Mahaleel, as ironically, it's the legacy he left behind that is keeping Proton afloat now! The Tanjung Malim plant, the stronger intergrated company from manufacturing to distribution to finance, the next generation cars (with Savvy being the current best-seller - timely for the times, but then as Mahaleel was an oil-man, he probably new about the coming oil crunch).

Towards the end, the Insider stated,"I would give them (Proton's current management) some time to try and use their best efforts to revive Proton. It's been about a year now, I'll probably wait another year before I start judging them"

Response: I refuse to give the current management another day, let alone another year! This statement of yours again smacks of Lah-ism! The current management is poor not just because it can't maintain Proton's profitability and growth as a business, but in fact because it has made matters worse!!!

How can you, a critic of Mahaleel,tolerate a management that is patently more incompetent than his! But then again I'm neither an expert nor an insider as you appear to be..

I would again like to thank the Insider and others who continue to miss-Analyse the Proton Saga for allowing me the opportunity to respond to their views... responding when I can as above is fun... and hopefully results in more materiel being put down for my book!

The Proton Saga: An Ongoing Example Of Analysis Gone Bad

I was reading an article (link below) in the Edge Financial Daily (effectively the Sun's business section) by Thomas Soon & Surin Murugiah entitled "Khazanah's Proton dilemma" and was attracted to the comment made that,"...no local player could offer any real value to Proton, with or without any foreign strategic partner...", based on their polling of a small group of "automotive" analysts.

http://203.115.192.58/cms/content.jsp?id=com.tms.cms.article.Article_e2b05589-cb73c03a-88b1e600-4db7a3e8

It would appear that these writers may have forgotten to sample a sufficiently large pool before penning a conclusion as, if I may myself analyse (being probably as qualified as those polled), there is one thing that the local players mentioned can bring that adds value to Proton, proper MANAGEMENT.

Proton currently doesn't have proper management, hence, even a profitable local Cokodok producing company can 'add value' to Proton. The Proof? Consider this...

1. Malaysia has the largest Passenger Car market in South East Asia, with the no 2 and 3 largest markets being its neighbours Thailand and Indonesia respectively.
2. Proton's home market is protected, pretty much guaranteeing a good margin for local car manufacturers, especially before the disaster that is the National Automotive Policy. And even with the disaster, other local manufacturers are making some money.
3. Proton has cost superiority over all its competitors, having the largest and most modern production facility in ASEAN at Proton City, able to produce a car in less than 1 minute, 365/24/7! Its cost superiority is especially true for its newer models where own design IP is as high as 90% by some accounts.
4. Globally and historically, all types of car companies have been shown to have the resilience to maintain control of at least 20% of its home market, whether they be Volvos, GMs, Tatas or indeed Protons, relying on strength of locality... unless they do something really stupid...

However, despite all these natural advantages, Proton is still not able to make a buck? Come on, something doesn't make sense here! When you consider the many errors committed by the current management of Proton, such as:

1. Letting the original VW negotiations collapse (and not even wondering why this happened the day after they sold MV Agusta, when VW clearly wanted a hand on Proton's technology arm... which included MV Agusta...)
2. Not stopping Wira production when the Gen-2, the Wira replacement model, rolled out. What, did they forget? Did they think that the Wira was such a great car - a car that even taxi drivers shunned in favor of the old warhorse Iswara?! This messed up their marketing, production, product portfolio balance, stocks management, what have you!
3. Not addressing the poor quality vendor issue till now! We know la some of these vendors have political links, but come on la, where is your so called integrity Mr. Chairman of Proton? I thought you were going to usher in a new era of the defect free Proton?
4. Record losses, the first conviniently hidden by the MV Agusta sale for a Euro, but many others not so convinient! Apa ni, masa krisis ekonomi dulu pun Proton untung! La masa Pak Lah kata ekonomi baguih Proton apa boleh rugi!
5. Failing to drive the formulation of a National Automotive Policy that would really benefit the national car industry, when Proton is the standard bearer of the national car industry! And even if they did give input, then it was pretty shoddy input considering how bad the NAP turned out to be!
6. And not to mention wierd distractions, like Dato' Azlan Hashim's first act of 'inspiration', unveiling that awful 'stretch' Waja... eeeuwww!

The situation at Proton these days are so deplorable that one wonders how the organisation even functions. It simply has no Management leadership to speak of. The competent people in its Management structure began their exodus following Tunku Mahaleel's dismissal, with the last competent and highly respected leader, then executive director of engineering and manufacturing, Dato Kisai Rahmat, resigning (many say in disgust) in July 2006.

The truth is that Proton has been suffering from a lack of and indeed deteriorating Management competence in the post-Mahaleel era, made worse by a Chairman who continues to undermine the efforts of senior execs. Everyone knows this. Even Khazanah VPs know this (though many won't openly admit it). This despite the fact that many of Khazanah's current VPs don't have real operational experience of managing a company, as the KPI's they worship are evidence of something undeniably wrong.

I said management incompetence began in the post-Mahaleel era. What, was Mahaleel so great?

No. Mahaleel isn't what I'd call "great". He isn't a Ghosn, an Iacocca or a Toyoda, but at least during his time Proton made money! Proton actually produced new models then and even had a 5-year vehicle program! In fact, the only new model unveiled by the current management, Satria Neo, was part of Mahaleel's program. If Mahaleel's plan had continued, we'd have a Proton MPV now!

If Mahaleel and his team were able to add better value as a manager than the current Proton 'Management', certainly the 'local players' that Thomas and Surin referred to would be able to, them being DRB-HICOM, Naza, Mofaz and Sime Darby.

I'd put DRB-HICOM as a firm favourite though. Not because I'm getting anything from it besides a huge ego boost from showing I can analyse better than the Edge, but because:

1. Tan Sri Syed Mokhtar Al-Bukhary who controls DRB-HICOM has had a successful track record in turning around former government/GLC lagards. The best example is the Port of Tanjung Pelepas (PTP), which he took over and transformed into 2006's Lloyd's List Maritime Asia Container Terminal Of The Year. The man just knows how to build good management teams!
2. DRB-HICOM is strongly intergrated with Proton's Manufacturing, Marketing and Finance base, what with it owning many of Proton's vendors (some needing improvements themselves, but probably easier to fix with Proton becoming a principle entity within DRB-HICOM) as well as controlling EON Capital. So, in Khazanah speak, the acqusition of Proton by DRB-HICOM has many 'synergies'!
3. I kinda like TS Syed Mokhtar's charitable works... makes me feel his undertaking of Proton would be as it was always intended, as a grand effort to build Malaysia as a nation, rather than just building another business.

The other firms are good contenders, but each have flaws. I list them here in order of priority to me if DRB-HICOM isn't meant to get Proton, with their flaws:

2nd Choice: Sime-Darby. It has some similar, but not as strong synergy elements DRB-HICOM has, but it has a major flaw... its engaged in another 'synergy' at the moment, so may be a little distracted!

3rd Choice: Mofaz. Ala, they're a little small la bub.

Last Choice: Naza. Wow, I put Naza last (even after Mofaz!), when the Edge puts Naza head-to-head with DRB-HICOM. Well, Naza may be favoured by the 'I have no links to Naza' minister Dato' Rafidah Aziz, but there is good reason why Naza should not get Proton, or at least be considered as the last choice. Justice.

Naza is a company constructed on massive AP over-allocation's (with SM Nasimuddin being the original AP King), over-allocation of taxi licenses and some suspect the 'forgiven' under-declaration of taxes on their imported cars. It would hence be unjust for Naza to be 'rewarded' with control of Proton despite their dastardly, some would say criminal, past. Besides, if the Sutera is any indication, Naza probably doesn't really have a clue how to do more than re-badge anyway!

I hope the above Tangent addresses this idiotic commentary from the Edge on how local players can't add value to Proton. I hope its evident that where value is concerned, our local players have management competence to contribute to Proton to save it from its current state whilst avoiding it from being a complete sell-out to foreigners. In fact, better we have these local players involved when dealing with potential foreign partners, at least to save the country from more embarassment...

Actually, I should have expected the Edge's incapacity to analyse the problems at Proton to continue as the Edge has always had a mantra of,"Proton needs foreign assistance", from at least 2004 when I started to read the weekly rag.

We have of course the ever famous Gunasegaram, who after being told by Mahaleel during an interview in 2004 that Proton only needs a foreign partner that can add value(!), seems to forget this altogether, then publishes an 'editorial comment' on the interview that Proton pretty much needs any Tom, Dick and Harry foreign partner it can get. Strange commentary coming from a business rag's Chief Editor.

And then there is the ever restless Ms Leela Barrock, who after failing to convince many of her view, that Malaysia 'Tak Boleh' w.r.t. making cars (implied in her article on the 27 Dec 2004 Edge Weekly), she took a 'gloves-off' approach, volunteering herself as representing Malaysians who want Proton to begone so she can buy cheaper foreign cars! Critical business analysis it appears is not a prerequisite at the Edge when it comes to Proton bashing!

May Allah save us from such high quality analysis as the Edge's efforts on Proton, for the sake of our nation's and our own socio-economic health...