Malaysia's Proton unable to compete by 2005: Yoshimi

Malaysia's Proton unable to compete by 2005: Yoshimi

KUALA LUMPUR (Reuters): Malaysia's national car maker
Perusahaan Otomobil Nasional Bhd (Proton) will not be able to
compete under liberalized market conditions in 2005, its
alternate director Fumio Yoshimi said on Friday.

"It will not be easy to be ready and cut costs and improve
quality in four short years when Proton joins AFTA," said
Yoshimi, who is also Mitsubishi Motors Corp general manager
(Southeast Asia).

Mitsubishi Motors, along with Mitsubishi Corp, owns a combined
16 percent stake in Proton.

Yoshimi said Proton, which enjoys preferential tariff
treatment, would need to reduce the cost and improve the quality
of its cars to be able to match foreign competitors when Malaysia
opens its auto market in 2005.

Yoshimi was speaking on the sidelines of a news conference by
a Japanese automobile group.

Malaysia has urged its Southeast Asian neighbors to reconsider
plans to open the region's car markets as liberalization could
hurt its two domestic makers.

Malaysia's other national car maker is unlisted Perusahaan
Otomobil Kedua Bhd, Perodua.

Malaysian Prime Mahathir Mohamad said on Tuesday ASEAN has
accepted the country's request that it be allowed to maintain
protective tariffs on automobile imports until January 1, 2005,
and not January 1, 2003 when AFTA, or ASEAN Free Trade Area,
officially kicks in.

Yoshimi forecast that once Proton's tariff protection is
removed, its share of the domestic market would fall to less than
30 percent from more than 60 percent now.

Under AFTA, ASEAN members have agreed to cut tariffs,
including those on cars, to between zero and five percent by
2003.

Proton was the brainchild of Mahathir as he pushed through
Malaysia's ambitious industrialization plan in the mid-1980s.

Yoshimi said the investment cost for Proton to make its own
engines and gear box transmissions, two parts it still imports
from its Japanese partner Mitsubishi Motors, was too high.

"It cannot be justified given Proton's existing production
capacity of 240,000 units a year.

"Mitsubishi produces some 1.2 million units a year which makes
it economical to invest money to make these parts, said Yoshimi,
who is also Mitsubishi's general manager (Southeast Asia).

Proton is expected to make 200,000 cars in 2000 and annual
growth from next year onwards is expected to correlate with the
country's gross domestic product growth, he said.

Yoshimi said Proton could also be hit on the export front,
following decisions by its main overseas markets such as the U.K.
and Australia to implement stringent emission rules.