Proton Continues to Bleed But PM's Taking It Easy

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May 23 2007
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Dealers selling the national Proton Holdings Bhd (KLSE: PROTON, stock-code 5304) cars are crying again today, claiming that 93 percent of their members are losing money. In a serious note, the dealers are urging the Proton management to find a foreign partner immediately. According to the Proton Edar Dealers’ Association vice president, already 20 percent of the dealers have gone out of business.
However the Second Finance Minister Nor Yakcop stressed that the government needs more time to solve the issue. He further added that the goveenment will not bail-out the ailing Proton, not that the government has huge excessive money to do so. But if you read how Wealthy Malaysia Spending Like There’s No Tomorrow, you would imagine the government should have the means to rescue it unless it doesn’t wish to do so or there’re just a couple of notes left in the chest.
So far in order to maintain its existence, Proton has encouraged some dealers to close down their business by offering some amount of compensation. Edge Daily reported that Proton plans to cut the number of dealers by 20 percent by the end of June. Bloomberg reported that Malaysian car dealers has a mind-boggling inventory of over 600,000 unsold used cars worth more than 12 billion ringgit (USD$3.5 billion). A fast solution could be selling it at half price or export it to African countries – at least you can recover some of the capital. In the world of stocks investing, this is known as “cut-loss” whereby you do not wish to drown further together with the Titanic.
Meanwhile, Malaysian vehicle sales continue to fell for a 15h straight month in April as the falling value of used cars and stricter financing made it harder for buyers to purchase new ones. Already there’re reports of cash-flow issue which is slowly but surely eating up Proton’s reserve. Proton’s reserve of RM 3 billion has declined to the current RM 0.5 billion currently.
Pride is only applicable for capable and quality company and management. You can’t have and show your pride at the negotiation table when you’re actually begging for the other party to help you get out of the wood both technically and manageability. You definitely can’t demand your rescuer to inject funds to help clear your mess. But most importantly you can’t demand to sit on the captain’s seat as if you’ve the skillsets to turnaround the company when in fact you’ve screwed up big time once the little protection hurdle is lifted slightly. There’s nothing wrong by re-structure the company and do what you’ve been doing best all this time – be a assembler, just like Perodua. If you don’t have the capability in management, design and architecture leave it to people who have the skills.
Learn how Japanese put down their pride in getting Brazilian Carlos Ghosn to turnaround Nissan Motors. Badawi definitely is in the comfortable position to take the quantum leap to cut the losses; it’s not his pet-project anyway. But based on the slow pace he’s taking, he could be buying times and waiting for the general election to be over before announcing his decision. Furthermore he still needs those votes to continue walk the corridor of power.
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Good article. You can see our take on it at:


Brendan Moore

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