Patrick Chalmers
\nReuters
\nTanjung Malim, Malaysia<\/p>\n
Malaysian carmaker Proton's new factory in Tanjung Malim is
\nthe best thing to happen for a long time in a town bypassed by
\nthe country's arterial North-South highway.<\/p>\n
But residents are not rejoicing yet because of questions over
\nthe company's future, and memories of the project stalling during
\nthe Asian financial crisis in the late 1990s.<\/p>\n
Proton has 60 percent of Malaysia's car market, the largest in
\nSoutheast Asia, but that is now under threat as Japanese and
\nKorean firms nibble away even before car tariffs of up to 300
\npercent fall to a maximum five percent in 2005.<\/p>\n
It is a scenario that plagues carmakers in other Asian
\ncountries, such as India, where Maruti had a market share of more
\nthan 80 percent for decades but is now facing stiff competition
\nfrom foreign rivals producing locally.<\/p>\n
Property prices have firmed since Proton revived plans to
\nbuild a plant in Tanjung Malim, but even property agents are
\ncautious about prospects for the town's potential savior.<\/p>\n
\"The problem is not that they haven't got the facilities, it's
\nthat they are in an incredibly competitive part of the market,\"
\nsays one, a Proton Wira driver.<\/p>\n
Proton has a lot at stake. Sales have slipped and the firm is
\ndesperate for new models to replace its dowdy Iswara and Wira
\nsedans. It has even started talking about alliances with foreign
\nmakers, something analysts say could lead to a merger.<\/p>\n
It was Prime Minister Mahathir Mohamad's ambition to wean
\nMalaysia off commodities that gave birth to Perusahaan Otomobil
\nNasional Bhd, or Proton, in 1983.<\/p>\n
A growing middle class, Japanese technology and fat margins
\nenjoyed behind tariff barriers have helped it survive despite a
\nglobal carmaking shakedown.<\/p>\n
Tanjung Malim, a nest of Communist activity and fighting in
\nthe 1950s, lost most of its transit trade when the four-lane
\nhighway passed it by.<\/p>\n
Hawker stalls once busy feeding truck drivers and other
\ntravelers make do with leaner pickings. Many youngsters migrate
\nthe 80 km (50 miles) south to Kuala Lumpur.<\/p>\n
The Proton plant, with an initial investment of 1.52 billion
\nringgit (US$400 million) to make 150,000 cars a year, is due to
\nstart production in the first quarter of 2004. It will employ
\n2,000 workers.<\/p>\n
Initial output of a variety of models could quickly satisfy
\ndomestic demand if sales decline as expected, leaving a question
\nover the plant's potential to expand to a million units.<\/p>\n
Times are changing for Proton's aging stable.<\/p>\n
In May, Proton warned of weak consumer sentiment and global
\nuncertainties, a view at odds with the Malaysian Automotive
\nAssociation forecast of 3.5 percent market growth to 450,000
\nunits this year.<\/p>\n
Its sales fell 10 percent, in both value and volume, during
\nthe year to the end of March to 9.27 billion ringgit, or 216,083
\nunits, from the previous year.<\/p>\n
Net profit was flat, but only because R&D spending was at
\nleast 200 million ringgit below a company forecast.<\/p>\n
The firm might replace the Wira with a 50,000 ringgit car that
\nhas the look and feel of a Lotus, one analyst said. Proton bought
\nthe British firm in 1996.<\/p>\n
\"If you like Proton you are betting on one thing: the car
\ncoming out next year,\" says an analyst at a foreign research
\nhouse in Kuala Lumpur, who declined to be identified.<\/p>\n
Lotus has already helped Proton develop its Satria GTi
\nhatchback, the flagship Waja sedan and CAMPRO engine.<\/p>\n
Proton's strategy is tough to gauge, but the bones of a plan
\nhave emerged. Last month it announced it would give company
\nsegments a chance to chase business and alliances on their own.<\/p>\n
Analysts saw the move as heralding new partnerships for a
\nthree-track plan: lower volumes of jazzier models at home, joint
\nventures to make and sell overseas, and farming out some
\nmanufacturing at home.<\/p>\n
\"It's quite clear they are just trying to give themselves some
\nflexibility for foreign ventures,\" said another analyst.<\/p>\n
Toyota might be one partner, given its hand in designing
\nTanjung Malim's state-of-the-art production lines, but its
\nMalaysian ties and aggressive inroads into Proton's domestic
\nsales may stand against it.<\/p>\n
Proton Chief Executive Mahaleel Ariff eulogizes Toyota for its
\nTanjung Malim work, in contrast to recent bland remarks about
\nshareholder Mitsubishi, which has a 15.9 percent stake in the
\ncompany. The Japanese firm would have to vie with other alliance
\npartners for selling parts and services, he said.<\/p>\n
John Bonnel, Bangkok-based director of Auto Resources Asia,
\nsees a Japanese partner for Proton, because Japanese would likely
\nbe more attuned to national sensitivities.<\/p>\n
\"Eventually, Malaysia will give in. There will be a company
\nthat will protect the dignity and name of Proton within
\nMalaysia,\" he said.<\/p>",
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