Mahathir tells Proton to cut production cost

Mahathir tells Proton to cut production cost

KUALA LUMPUR (AFP): Malaysian Prime Minister Mahathir Mohamad has told national carmaker Proton to cut its production cost to stay competitive for the opening in 2005 of the regional auto market.

Mahathir in remarks published Saturday said Proton cannot expect government protection once the ASEAN Free Trade Area (AFTA) was implemented.

"When AFTA comes in, cars from other ASEAN countries would not be subjected to high duties and would be sold at lower prices," he was quoted as saying by the New Straits Times.

"You have to learn to compete with them. We cannot protect you anymore."

Mahathir urged Perusahaan Otomobil Nasional Bhd. (Proton) to emulate Korean car manufacturers whose production costs were one- third of theirs.

"We must learn how to reduce our production costs while at the same time come out with good quality automobiles," he said.

"Proton must prepare itself well to face future competition."

Proton now has more than 65 percent of the Malaysian market due to high tariffs on imported cars. This protection will largely disappear in 2005 under AFTA where tariffs fall to zero to five percent at the start of 2003. Malaysia has obtained a reprieve for its auto industry till 2005.

Founded in 1983 as part of Malaysia's push into heavy industry, Proton said last week it aimed to introduce at least one new model a year to prepare for AFTA.

Mahathir has said the government is prepared to authorize the sale of up to 30 percent of Proton and that a U.S. car manufacturer has expressed interest.