Proton's win-win tie-up with foreign partner to create more jobs for Malaysians

This will not only translate into better sales for the national carmaker, but also ramp up production at the Shah Alam and Tanjung Malim plants which are now producing below capacity.

This will enable the foreign strategic partner (FSP) to have access to the readily available manufacturing facilities which clearly shows that Proton too has much to offer the incoming FSP.

The foreign partner's 51 per cent equity participation, accompanied by the infusion of funds, global technology, expertise, creation of new markets and branding, will also grow the Proton brand internationally.

For Malaysia, the economic spillover would be significant as the strategic tie-up would undoubtedly generate increased job opportunities, particularly for car engineers and technicians coming out of local colleges and universities.

Against such a backdrop, parent company DRB-Hicom Bhd's efforts to revitalise the national car company by calling for bids from FSPs is a step in the right direction.

DRB-Hicom holds 100 per cent equity in Proton.

No names have been mentioned since the last submission date of Feb 15, 2017.

But newsreports last September reported that aside from Geely Automobile Holdings, which has been reported to be in the lead, Peugeot maker PSA, Japan's Suzuki Motor Corp and French carmaker Renault SA had also signalled interests in the partnership.

DRB-Hicom announced last Wednesday the new FSP would be announced in the first half of 2017.

In analysing the would-be partnership, the question that arises is who would want to be the FSP for a car company that is financially weak and having problem business-wise.

Besides this, its market share has been spiralling downwards.

On closer inspection, Proton has something valuable to offer. First of all is its Tanjung Malim and Shah Alam assembly plants with a combined capacity of up to 400,000 cars per annum.

And with Proton sales of over 100,000 cars per annum, the plants are producing below their capacity.

By buying into Proton, the FSP gains the sale of over 100,000 cars in addition to its manufacturing facilities to produce more cars for the Asean market.

Another plus point for the FSP is an immediate market for distribution eco-system that has 14 per cent market share.

Over the years, Proton has in its infrastructure 4,000 dealers and 27,000 vendors giving the FSP a ready distribution platform.

Why create a new manufacturing plant, vendor and dealership systems which would take years to materialise when Proton has all these in its existing network.

It has been previously reported that PSA of France plans to build a factory for its South-East Asian market and is on the look-out for site either in Indonesia, Thailand or Malaysia so as to reduce its reliance on the challenging European market.

It plans to collaborate with a local partner to avoid beginner mistakes.

It is understood that PSA -- before Proton was on the cards -- was deciding on a US$2 billion (US$1 = RM4.45) manufacturing plant in Indonesia, but with Proton now available, PSA opined why create a vendor and dealership system that would take years to materialise in Indonesia.

It would therefore make business sense for PSA to bid for Proton now as a FSP which would lead it to abandon its initial plans to set up a full-fledged manufacturing plant in Indonesia.

Another 'gem' in Proton is that it is a co-owner of Miyazu's hot press forming (HFP) technology. A subsidiariy of Proton produces high quality car parts and tools for top-notch car firms such as Toyota, Honda, Nissan, Lotus and Ford.

Proton Preve units produced for domestic and export markets utilise HPF which helps to provide better protection and higher body and structural rigidity without compromising the overall bodyweight of the car.

And the icing on the cake is that Proton ASEAN's only "full-fledged" car manufacturer, is providing the FSP with a ready platform to kick start serving Asean's emerging market.

ASEAN, with a population of 600 million, recorded a 4.7 per cent in increase in vehicle sales to 947,241 units in the fourth quarter of last year, from 904,504 units in the same period in 2015, according to AsiaMotorBusiness.com.

Full-year sales are estimated at 3.24 million units.

A collaboration with a FSP will open new opportunities for both Proton and the strategic partner to expand into ASEAN markets which translate into better sales for the national car manufacturer.

With a ready car assembly in Malaysia, Proton's new FSP would have immediate access to production capacity that will qualify the new partnership to ship vehicles tax-free in ASEAN.

No FSP would come in merely to maintain the current volume as it would make business sense to ramp up the maximum capacity of the manufacturing plants as well as its distribution eco-system.

This would see economic spillover as well as create job opportunities contrary to what has been mentioned by a non-governmental organisation which asked Proton to prepare to retrench its employees.

As to its marques, Proton Preve and Suprima S, are the only ASEAN cars to achieve full five-star Australasian New Car Assessment Program rating.

And let us not forget one of the strengths of Proton, which is the hundreds of research and development engineers, who would be made available under the forthcoming collaboration.

To the naysayers that it is not right for Proton, as a Malaysian product or icon to be owned and built by a foreign entity, they need to take a look at the global car manufacturers and players.

Most of the well-known marques are now foreign-owned.

Jaguar Land Rover is owned by the Tata Group of India. German-owned BMW now produces two British icons -- Rolls Royce and MG Rover, which produces the Mini.

And let us not forget that Proton is the owner of Lotus, the once British famed sports carmaker.

Even China's Geely, which reportedly is in the lead for the FSP, owns Swedish carmaker Volvo and London black cabs, which it produces in Shanghai and transported back to the UK.

Second Finance Minister Datuk Seri Johari Abdul Ghani had earlier this month said that the government has no issue over DRB-Hicom relinquishing its 51 per cent stake in Proton to a FSP.

"If Proton is to stand alone, it cannot flourish overseas. It is better for Proton to become a well-known international brand, rather than stay domestic and sell between 200,000 and 300,000 units, which is not sustainable," Johari said.

"We are making cars only for Malaysia and this is not sustainable with a population of only about 31 million. We also have Perodua and other car assembly brands.

"I think it is all about volume, as well as quality and technology, alongside a good design. These are all the ingredients needed for a better car which people would buy," he added.

This 'win-win' collaboration with the FSP would see not only fresh funds being brought in but also access to global auto technology, new markets, brand, and expertise to further grow the Proton brand.

As the world has witnessed, many of the famous brands have been kept alive by foreign investments.