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Sales have been decreasing and will continue to slides. For the three months ended Dec-2006, Proton continues to register quarterly losses of RM 281.45 million (USD 82 million). In fact if you refer to the five-year financial highlight, the EPS (earning per share) demonstrates an excellent reverse-healthy trend – dropping consistently from 216 cents per share in 2002 to 8.5 cents in 2006. You can see the figures here. And we’ve not even open up 100% of the automobile’s market to the world. As an investor, would you invest in such a company?
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One of the basic fundamental rules in investing a company is to investigate their management prior to pump in your hard-earned money. Former premier Mahathir’s personal agenda aside, current Proton has indeed a very weak management team who couldn’t drive the organization to a better direction. Quality asides (not that they can do anything in improving it after more than 20-years in the automobile industry), Proton simply does not have a capable team to even produce attractive models. To survive in global automobile industry, you have to constantly produce new models for ever-demanding consumers. The most recent Proton Savvy and Gen2 were not successful in turning around the already sick company
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Proton does not have the innovative and know-how in designing an appealing models. Let’s face it, if the huge and expensive Proton team has half the creativity and design ability of Honda, Nissan or Toyota, Malaysian won’t be driving the still-in-production model launched more than 10-years ago. Hence the need to find a foreign partner such as Germany’s Volkswagen (FRA: VOW) or U.S. car giant General Motors Corp. (NYSE: GM, stock), of which the talk with Volkswagen already failed attributing to government reluctance to cede control to foreign hands.
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Political pressure will prevent premier
Badawi from giving up control of Proton for as long as the ruling party relies on the Malay-votes (mostly work under Proton or its’ supply-chains payroll) to retains their power. You can argue until the cows come home that the operational costs will continue to soar but sales drops like there’s no tomorrow and such a justification is strong enough for a re-structuring in cost-cutting. In order to stay in power, nothing can be done to heal the wounds as the pride of retaining the Proton’s logo surpasses the conscious to re-vitalize the company.
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Perodua, the second homegrown manufacturer of which Daihatsu Motor, a subsidiary of Toyota, owns a 51 percent stake, will continues to eat-up Proton’s cake in the affordable yet attractive models range. It’s Myvi model was a great success and top the best-selling model overtaking Proton.
Today, former premier Mahathir drop a bombshell stressing Malaysia must choose a domestic partner over a foreign company for ailing carmaker Proton to preserve its status as a national company. “If you sell to a foreign company, it will no longer be a national car. They have to sell to a local company,” Mahathir, who is Proton advisor told report
ers. Mahathir who oversaw the creation of the ailing carmaker in 1983 under his tenure as premier has singled out Prime Minister Abdullah Ahmad Badawi and his administration for badly managing the company.
Its’ obvious Badawi is directionless on how to manage this national bleeding giant. The only way out and decision to make is obvious but it’s highly unlikey to be executed for political survival. This could be the only time Badawi and Mahathir share the same common interest.
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April 18th, 2007 by financetwitter
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