In an exclusive interview with StarBiz editor YAP LENG KUEN, Tengku Tan Sri Mahaleel Tengku Ariff spoke of the journey of Proton Holdings Bhd; how he has helmed the national car company and taken it to another level. He also shares his views on what it takes for Proton to be globally competitive. Below are excerpts of the interview.
I think what is important is not my achievement. I am not that important, we should remember that nothing is permanent. We are all just passing through. What is important is that I am a part of a wheel only serving Malaysia and its wishes. It just happens that I headed the company.
But as in any organisation, it’s not one individual but a sum total and aggregate of all staff, vendors and dealers ... the little people and the bigger ones ... they all contribute in big and little ways ... all are important.
I am indeed very, very proud to see Malaysians grow not only in their belief of the national agenda, but in the stature of their skills and knowledge building of their own competencies and capacity.
Many of us do not know it but in Proton today are some of the best and most brilliant Malaysians you can find. They come from all background, race and religion. They range from engineers, marketers, experts in finance, strategists, production people, tool makers, machinists and more ... but most important of all, most of them are Malaysians.
We should remember this.
The time you know you have done well in all aspects is not when someone pays you a compliment but when customers are happy and the best compliment must surely come from your competitor who is prepared to put money to buy a stake in Proton.
Proton a national asset
Over nine years, I have witnessed all sorts of proposals from Malaysian entrepreneurs and the world’s largest companies, including Temasek Singapore and Volkswagen, to buy Proton.
Surely, these companies are not foolish with their money to buy into Proton. So, there must be something very good in this Malaysian jewel.
There is a secret, of course.
I am proud that everyone worked so hard, burning candles sometimes at both ends, to make Proton a global Malaysian company and the only Muslim country to be able to design and produce a car.
But even more compelling is that we have made Proton a national asset from every perspective.
From the Industrial Master Plan (IMP) that the government had laid out, we have delivered every aspect and more of this Malaysian wish.
Are you aware that the IMP2 will only end in December 2005, yet we beat the plan five years ahead? We should have gotten a medal instead of criticisms, some coming even from the ministers and the deputy ministers.
Developing core competencies
Certainly, from the New Economic Policy (NEP) point of view, the Malays can look up to Proton as the only establishment that has developed core competencies by itself that are comparable to the world’s best.
No other company can claim to be able to design by itself on such a scale and product complexity that we are involved in.
We must remember that Proton has been compared to other car companies and automotive nations...I believe unfairly, most of the time, as the real picture is not told or understood even by the policy makers.
Proton is not about making a car but about Malaysians building its competencies and capabilities and bringing up Malaysia’s capacity building to world-class standards.
It’s about the end game for Malaysia to compete on the new globalised and liberalised world.
Name me 10 Malaysian companies that have their own products today, world markets, a global brand and reach? Hard, isn’t it?
Let’s do some comparison.
Proton is only 20 years old and we started designing by ourselves, together with Malaysian vendors, only in 1997. That’s about eight years ago, it is barely a child when we compare it with the leading companies and nations.
The Europeans and Americans have been in this business for almost 100 years. The Japanese took 60 years.
If you remember in the 1960s, a Japanese car was compared to a Milo tin can! Today? It’s the reference point for a good car.
The Koreans took 40 years and they are only beginning to be accepted now. By the way, in South Korea, I was told that if you drive a foreign car, even the petrol pump attendant wouldn’t serve you.
This is how fierce Korean nationalism is and they wish to see their companies succeed.
So, how do you reconcile this criticism of Proton and the country’s journey? When building capacity and engineering design, you cannot cut short time, unfortunately, if you do, you might end up making a cart instead of a car.
Proton deserves more respect
Many Malaysians call us the “pampered son” despite being so young in the industry.
I believe we have done so much for the country and for Malaysians, we deserved to be shown a little more respect as a son of Malaysia that we can all be proud of.
Over the last seven years, we have designed our own engine – the Campro. We have designed platforms where the following products are a living proof – the Waja, Gen2 and Savvy.
We own Lotus cars and engineering; the top motorcycle brands – MV Agusta, Cagiva and Husqvarna.
We doubled our exports last year and into developed markets such as the Middle East, Britain and Australia. We have brought back almost half a billion ringgit in earnings.
We bought a plant in Indonesia. There are many more.
What I want to demonstrate to you is that, it is Malaysians who have delivered all these ... our own people. Is this still not right? It baffles me sometimes and demotivates the 11,000 of us who want to make the Malaysian dream a reality.
A competitive envelope
Another point we are missing is the competitive envelope that Proton has been put into.
You know the national car programme under the IMP2 only finishes in December this year. Yet policies have been constructed that jeopardise the whole plan.
For example, why accelerate market access when the World Trade Organisation allows up to 2020 before opening up?
Why the Asean Free Trade Agreement (Afta) in 2000/2003 when we know that the IMP2 is up to 2005?
I certainly remember that Malaysia’s position on market access (openings) was based on a win-win basis not win-lose.
In other words, we open up when both gain and not the other way.
The auto policies crafted that deviated significantly from the IMP2 road map, especially the with opening of the market under the Approved Permit (AP) system over the last two years and the entry of South Korean cars as well as Afta, caught us without any warning.
Then, there is the introduction of three national cars; special consideration for Hyundai in a small market like Malaysia; and the newcomers not having to burden the NEP, the vendors’ support programme and buy Malaysian parts - all added up to a contrarian position between what we understood the government wanted and what the policy-making ministry wanted ... tell me how do you manage?
The competitive ground that Proton was asked to compete, therefore in my mind, was for sure, designed to make it difficult for us.
A look at other government firms
Let’s look at other government companies and their competitors:
·Energy: We have one company Tenaga Nasional Bhd. It competes with itself.
·Telecommunications: We have one company on fixed line, which is Telekom Malaysia. In mobile phones, we have Digi and Maxis.
We all know there are many other telecommunication companies that want to enter the market and that will drastically lower prices.
·Banking: How many foreign banks are there? Citibank; HSBC; Standard Chartered; Macquarie; Bank of China ... etc? Not many when you consider the large ones available.
·Aviation: Apart from Air Asia, we have Malaysia Airlines. That’s all the competition.
Now, let’s look at automotive:
·four national cars and national treatment companies.
·67,000 APs into the market for all brands.
·17 car assemblers, short of the Russian and Iranian cars, all the others are here.
I believe that unless you appreciate this landscape, you just cannot imagine the challenge thrown to Proton. So what protection are we talking about?
We do get some tax incentives but so do the other three. So why pick on us? Even more important, we do not under-declare.
Not that we cannot but we don’t, as we would be cheating our own people. Proton is not where it is today because of underhand tactics.
Financially, Proton is a company that had never lost money during my tenure. Even in the Asian financial crisis, we made a profit and had cash of RM2bil.
Certainly, we have not gone to the government to bail us out. On the contrary, we accelerated payment to the government of a long-term debt taken when the company started and by next year, we would have paid off every sen we owe to the government.
Also, we only spend when we can afford to ... so many projects were funded from our earnings including Tanjung Malim, which cost the company RM1.8bil, and almost RM4bil in products and engineering.
So you see, Proton is very rich in assets and all have been paid for. Even more, its properties have not been revalued.
So, apart from the skills and know-how, any investor buying into Proton acquires undervalued assets that have been paid for and solid cash of more than RM2bil ... a very tempting target.
But decision makers have to separate a point: is it shareholder value or is it national value? This can be diagonally opposed ... tricky .... but I know which I will choose!
To be globally competitive
The key to our future success lies in capability and competencies. It’s like a tree.
If the tree has very strong roots, then the foundation is strong. A good trunk will carry many branches and thus, fruits. So in a storm, a strong tree will not be uprooted easily. So Proton must be a strong tree.
Thus, Proton has been building its competencies through projects, programmes and key acquisitions in the key value chain of the industry.
For example, engineering design of structures is one of the skills but structures can take many forms, from aluminium tubs to frames and steel forms. These are very complex.
So having Lotus, MV Agusta and Proton (with Mitsubishi background) is the core foundation. This is the root. It must be further strengthened and very quickly.
I don’t know how far it is true but there are motivation problems creeping in and some resignations already.
Then, it must continue building its vendor and manufacturing base. It must seek a global positioning into core strategic areas. This is to access markets quickly.
Of course, it must expand its network of distribution into 200 countries quickly, but at the same time, defend its domestic markets. These are its branches.
Lastly, the fruits are the products that must be spawned from the five platforms it possesses.
These are in place or being rolled out. It’s a matter of execution.
What will be critical, at this point, will be leadership. Running a group like Proton by committees is a recipe for losing out in a fast changing competitive landscape.
Secondly, it needs people from industry background (internally) to steer it. Have you seen Honda or Toyota being run by accountants, auditors or non-executives?
We have seen the result of this recipe - General Motors.
The unique advantage Proton and Malaysia have is their cost competitiveness in human resources, cost of utilities and infrastructure and being the provider of Malaysian education .... don’t give this away ...
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