Proton - Perusahaan Otomobil Nasional Berhad

EXECUTIVE SUMMARY

PERUSAHAAN OTOMOBIL NASIONAL BERHAD or PROTON was incorporated on 7th May 1983 to manufacture, assemble and sell motor vehicles and related products. PROTON produced Malaysia’s first car, the Proton SAGA which was commercially launched on 9th July 1985 by Malaysian Prime Minister then, Tun Dr. Mahathir Mohamad who conceived the idea of a Malaysian car. A multinational auto giant, assuming Mitsubishi had sensed opportunity in Proton and Malaysia and approached consultant, Saiful Alawi to review Proton and recommend whether an investment and/or collaboration should be considered. Saiful need to evaluate the performance of Proton whether it worth to invest and/or collaborate with them. However, it show that Proton not worth to deals with.

PROBLEM STATEMENT

Mitsubishi appoint Saiful Alawi need to evaluate the performance of Proton whether it worth to invest, collaborate and/or avoid to deal with Proton.

ALTERNATIVE SOLUTIONS

Saiful Alawi must give his opinion whether to invest,collaborate and/or do nothing with Proton. Using Balance Scorecard as a measuring method to evaluate Proton’s performance, it will covers both the financial and non-financial performance and it will give Mitsubishi the overall performance of Proton as a whole. There are four perspectives in Balance Scorecard which are financial, customer, internal process and learning and growth perspective.

Firstly, Saiful will evaluate the financial performance of Proton such as liquidity ratio. Liquidity ratio shows the ability for the company to pay its short term liabilities. Proton is not strong in their finance and affects the ability to pay the debt with the cash asset. Proton has quite poor performance in terms of its liquidity starting year 2012. Table 1 in appendix resulted below than 1 indicates that Proton does not have enough money to pay its short term debt. Besides, over the past years, Proton had seen its sales plunging by double-digit, which shaved its market share from a stellar 60% in the 1990s to 17% currently. According to the latest statistics by the Malaysian Automotive Association, an industry body, Proton sold 115,783 cars in 2014, a significant 16.5% drop from 138,753 registered in 2013. This effectively trimmed its market share from 21.2% in 2013 to 17.4% in 2014. The numbers for Proton cars sold against market share over the past six years is as follows: Year 2009 (number of cars sold 148,031; market share 27.6%), 2010 (157,274; 26%), 2011 (158,657; 26.4%), 2012 (141,121; 22.5%), 2013 (138,753; 21.2%), 2014 (115,783; 17.4%). While the Proton’s profitability ratio in Table 2 also show sharp drop from 2012 to 2014. Its rival Perodua recorded a market share of 29.4% (195k units), ahead of Proton’s 17.4 % (115k units), which adds up to a combined market share of 46.8% in Table 3.These show that the financial performance of Proton is not good according to the ratio and sales performance.

Secondly, Saiful will look into the customer perspective where this shows how Proton deals with the end user because they are the ultimately the reason that financial aspects succeed or fail. Proton had received abundant of complaints from their customer as its car do not satisfy them very well. Proton cars suffered due to reported poor quality product quality control and non-descript designs which affect the customer satisfaction. For example, the window of Proton cars easily stuck, the engine failure or leaking, GPS not functioning well and many others complaints on Proton’s Facebook (Pic 1). This compliants show that the customer perspective of the Proton is bad and do not worse to invest or collaberate with.

Thirdly, in the internal process perspective, Saiful will evaluate how the management and whole organization run the business. This perspective will affect the customer perspective as it determine the satisfaction of the product. Proton is sufferres with the quality issueThe existing quality issue can affecting brand image caused by active service units such as political interference by Tun on vendor selection, appointment of top management and design. Plant utilization low can also inability to retain and cultivate talent, inability to introduce real new models, no economies of scale, inability to penetrate export markets, inability to satisfy customers' needs, no sense urgency, corporate governance and complete numbness of developments in the auto industry. Funds shrinkage can influence result in Proton inability to introduce new models. The vendor issue arise as they provide low quality parts to the Proton. However, the vendor has been selected from bumiputra companies to help them increase their profit but it give problem to Proton as their cars claimed as poor quality cars but the cannot terminate the vendor as the government policy. Besides, the management also do not make a correct decision by selling the MV Agusta to GEVI S.p.A for a token of €1(RM5.00)This situation surprised Malaysian because buy the company with milions of Euro and sell it with a mere €1? Tengku Mahaleel and Tun Dr. Mahathir strongly criticized the Agusta sale and demanded reasons because their credibility is at stake. Later, BMW purchased MV Agusta for €90 million from GEVI S.p.A in July 2007 and Harley-Davidson bought it for €70 million from BMW.Proton loss approximately RM800 million in selling MV Agusta for RM5. The buyer invested 1 Euro and made 160 million Euro. This creates a scandal where the new managing director maybe collaborate with Proton Chairman if sell MV Agusta they get an incentive from Khazanah Nasional Bhd. That is why they fire Tengku Mahaleel from his position as CEO that might interfere with the plans. They maybe have their own interest in this situation. These show that the internal process was so bad in term of the internal process perspective.