Mustapa sets terms for govt support of Proton

International Trade and Industry Minister Datuk Seri Mustapa Mohamed said the new chairman and senior management of Proton must help towards enhancing the true potential of Proton and pave the way towards a better future for the company.

"I have been informed that there were instances when Proton appeared to be unprofessional in its decision-making process.

"The government must not turn a blind eye to challenges faced by Proton. It must be committed to ensure continuous growth of the domestic automotive industry which would include the transformation of Proton and its ecosystem," he said.

Mustapa said the problems faced by Proton were very challenging as the company's current share of the domestic automotive market dropped to 15 per cent from a peak of 74 per cent in 1993.

"In this extremely competitive line of business, scale is crucial and there is a need to set aside high capital resources for research and development.

Proton currently has neither of them," he said in a statement today.

Mustapa said Proton is now is a relatively small player in the global context and is not able to compete with other foreign companies unless it could substantially increase its exports.

"Proton is suffering a problem of underutilisation with about 35 per cent each of its two production plants being utilised.

"The decision to have two plants is probably one of the mistakes made in the past by Proton," he said.

Mustapa said the government believed that the current business model adopted by Proton was not sustainable.

"The government has been seriously deliberating Proton’s request for assistance for grants and soft loans. It is a major request and the government needs to be thorough with its evaluation as a lot of public money is involved.

"We need to be prudent in allocation of resources at this time when our national revenues have been seriously impacted by falling oil and commodity prices," he said.

Hence, Mustapa said if the government were to assist Proton, the latter should fulfill four conditions, namely immediately identify a strategic foreign partner; it must be professionally managed; no interference in its business; and tough but necessary measures must be put in place for its long-term sustainability.

Mustapa said Proton almost struck a deal with a renowned foreign player in the automotive industry about three years ago, but pulled out at the last minute.