Proton Says No to VW and GM, Will Go It Alone

By Brendan Moore

11.21.2007

Proton Holdings, the Malaysian government-owned parent company of Proton, has announced that it is ending talks with Volkswagen over a cooperation agreement. Proton also ended similar talks with General Motors recently.

Partnership discussions in the past have included other auto makers such as PSA/Peuget-Citroen.

Proton stated that it would no longer seek a partner and was confident that its new models and domestic growth combined with overseas expansion would generate the profit it so desperately needs.

There are no auto industry analysts that agree with this scenario, however, and the consensus is that Proton needs a partner not only to save it from building negative market forces, but mostly from itself.

Proton has lost market share steadily ever since the Malaysian government removed protective tariffs that stymied other automakers efforts in Malaysia. Proton had over 52% market share in Malaysia just six years ago, but they are now down to 31% and could still drop more.

The Malaysian government has resisted bailing Proton out with new investment funding, and Proton has found it difficult to raise the money it needs for a new product portfolio, capital funding to enter new markets, technology and operational efficiencies.

This cash-poor situation has led to some curious actions from Proton recently, such as last week’s company press release that Proton had entered into an agreement to build an “Islamic” car, with funding to be supplied by Iran and Turkey. The car, according to Proton, “will incorporate features such as a compass to determine the direction of Mecca for prayers as well as compartments for storing the Koran and headscarves”.

Supporters of the plan to acquire a foreign partner are crestfallen as they see that now-discarded plan as the only practical solution to Proton’s many problems. The preferred outcome for the boosters of the cooperation scenario was that VW would have transformed Proton much like they did with Skoda, or that GM would have taken Proton and performed the same sort of magic they pulled off with Daewoo, bringing that company back from the dead.

2007 Proton Satria GTi

But that’s not going to happen, at least not any time soon. The Malaysian government may reconsider their stance at some point in the near future, but who can say?

COPYRIGHT Autosavant.net – All Rights Reserved

Author: Brendan Moore

Brendan Moore is a Principal Consultant with Cedar Point Consulting , a management consulting practice based in the Washington, DC area. He also manages Autosavant Consulting, a separate practice within Cedar Point Consulting. where he advises businesses connected to the auto industry. Cedar Point Consulting can be found at http://www.cedarpointconsulting.com.

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8 Comments

  1. Yeah, that Islamist car will be a big seller. That will really save the company.

  2. Protons are not as awful as some people claim. A lot of the reason they’ve lost market share in Malaysia is just that before people didn’t have a lot of choice and now they do, so it was unreasonable to expect that their numbers would stay the same in terms of market share.

  3. Islamic car? That’s rich. I love it. You know things are bad when you stand up in a press conference and say something like that with a straight face.

  4. I think GM could do a better job than VW with this company, although the involvement of either company would be a huge plus for Proton. They are just hapless.

  5. Yeah? Well, I think VW could have done a much better job with Proton. They have the vehicles that match up with the region’s consumer capacity. I don’t think too many Malaysians are going to be buying huge GM trucks that get 12 mpg.

  6. Negative perceptions normally came from bad past experience, and i am not surprised to see such comments from public especially proton owners. Proton’s “i-care” after-sale service is a good attempt but it will be just pipe-dreams, unless management instill a ‘high-tech-high-touch’ culture in-within and among vendors.Simply, bcoz the ‘just-in-time & disposable concepts’ are relevant to only
    production situation but not with
    knowledge, heart-and-soul of the people. So, i suggest proton go back to basic virtues.

    Business-wise it is o.k to work together or be allianced with other companies, be it VW,GM or Cheri or Mahindra or TATA, as long it is profitable. We will be happy and it is good for u too proton!!!

  7. I think they can make it on their own. The developing markets they plan to sell in don’t have very discerning customers.

  8. Unbelievable. An Islamic car, eh? Things must be pretty desperate over at Proton.

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