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Carmaker Proton in dire need of sustainable turn-around plan

Publication Date : 17-10-2012


Malaysian automobile manufacturer Proton Holdings Bhd will drag down its parent DRB-Hicom Bhd if a sustainable plan to turn it around is not in place, according to DRB-Hicom chief operating officer Che Khalib Mohamad Noh.

“We all know that Proton is a big problem...If we do not solve the problem, not only will Proton go down but the whole DRB group,” he said at the MICPA-Bursa Malaysia Business Forum 2012 in Kuala Lumpur yesterday.

He said the problems had to be resolved as they would affect not only the national carmaker but also cause a ripple effect in the automobile ecosystem including the dealers, distributors and service centres.

He said the whole ecosystem consisted of more than 100,000 people compared with Proton's 11,000 employees.

“Not only do we have to take care of these 100,000 people, we must come out with a business that is viable,” he added.

He said a car had many features today compared with its preceding models which implied that margin compression was one of the challenges to be tackled.

“It is going to be a volume game, but Malaysia does not have that kind of numbers.

“We are going to work on something (for Proton) which will be announced by next month,” he said, adding that it needed to produce models that have market demand and competitive prices.

The domestic sales target for Proton was raised to 200,000 units for the current financial year ending March 31, 2013 (FY13) from 167,000 previously.

Hong Leong Investment Bank (HLIB) Research in a note said the management was tight-lipped on its strategy to achieve 200,000 units in Proton sales in FY13.

“From April to August 2012, Proton sales were only 61,400 units, implying another 138,400 units for the remaining financial year to hit its target,” it said.

Che Khalib declined to comment on plans for the ailing luxury marque Lotus and Proton's potential foreign partner. At the conglomerate's AGM in September, managing director Mohd Khamil Jamil revealed that it had plans to introduce a foreign partner to Proton.

HLIB Research said DRB-Hicom was still finalising the turnaround plan for Lotus which was expected to be presented to bankers by year-end.

On Pos Malaysia, Che Khalib said he did not consider Pos Malaysia a “problem child” but noted that it needed some transformation.

“We are excited to have Pos Malaysia within the DRB group. The next phase of Pos Malaysia is going to be more interesting with the number of outlets it has.”

In a separate report, RHB Research said market re-rating could come from positive traction from ongoing efforts to revamp Proton, including its domestic sales and spare parts dealership network and procurement function, and the long-term transformation of Pos Malaysia.


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