Thursday, April 7, 2016

PROTON


As posted by Dr. Mahathir Mohamad at Che Det on April 05, 2016

To: Proton car owners and buyers

I feel I owe you all an explanation as to why I resigned as Chairman of Proton.

I was not expelled by Proton management or owners. I decided on my own, for the sake of Proton I should leave. I therefore have no grudge against Proton nor do I want it to fail after I left.

This is because Proton seems to be having difficulties with the Government and for some unknown reason sales of Proton cars have plummeted.

I know I am persona non grata with the Government. I do not want to be the cause of Proton’s inability to recover because of my presence.

I would in fact like to see Proton recover and do well.

So, please, Proton owners and buyers, don’t take it out on Proton because I am no longer the Chairman. Please continue to support Proton.

Proton has great ideas about introducing new models which are of good quality. This month they will launch the new Perdana. Later in the year they will launch the new Persona and Saga.

Proton cannot expect any help from the Government.

Only Proton owners and fans can help Proton. So please help Proton, your national car maker.

1. I am no longer the Chairman of Proton. However I feel a need to merely state the facts.

2. Firstly Proton is now privately owned after it was bought at RM5.50 per share (originally priced RM2.95 but bidding pushed the price up) largely from Khazanah and a few other share holders. Khazanah was supposed to hold shares for Bumiputras but is now representing the Government. Proton is not a GLC (Government Linked Company).

3. Government policy previously was to encourage local contents. All cars manufactured or assembled in Malaysia are entitled to rebates on excess duty based on the percentage of local contents used. Most foreign cars assembled in Malaysia has 30 – 40% local contents. Proton has almost 90% local content. Therefore the rebate for Proton is higher. It is not a privilege for Proton alone. All foreign and local cars enjoy this privilege. Local contents increase the cost of producing the car. This is because the deletion allowance by the foreign company is invariably lower than the cost of the local component.

4. The Government claims to have provided grants, various forms of assistance as well as tax foregone to the take of about RM 13.9 billion in total.

5. Most of this is made up of taxes foregone. Proton records show the following:
(1) RM1,320 million as tax incentives to Proton also eligible to non-national cars
(2) RM773.8 million in R&D Grant, Special grant, Stimulus package, eligible to all automotive manufacturers.
(3) RM12,532.6 million in customized incentives also eligible to all automotive players.

Total Government contribution from 1985 – to date amounts to RM 14,631.4 million.
Details of (1), (2) and (3) are appended.

Total contribution by Proton to Government since 1985 totals RM 24,905 million.
These are made up of the following:
(i) Excise duty from 1985 onwards RM 11,785 million
(ii) Sales tax from 1985 onwards RM 9,470 million
(iii) Corporate tax from 1985 onwards RM 1,410 million
(iv) Import duty from 1985 to 2008 RM 1,403 million
(v) GST from 1/4/2015 RM 28 million

Total RM 24,905 million

Clearly Proton has paid more to the Government than Government to Proton.

Capital injection by Government in 2 seed funds total RM 400 million. These have been fully paid up. On top of this, Proton had fully funded the 1.8 billion Ringgit Tanjung Malim Plant from its internal coffers which at that point had a staggering total of 4 billion Ringgit.

6. In addition Proton provides jobs for about 12,000 workers at any one time directly, and more than 250,000 souls indirectly. Proton reduced the outflow of funds probably amounting to more than 100 billion Ringgit.

7. Vendors also create jobs and reduce outflow of funds.

8. We can forget the development of engineering capability as our policy now is to encourage imports.

9. Incidentally all the countries exporting cars to Malaysia implement tariff and non-tariff barriers resulting in excluding Proton importation into their countries. This contrasts with our policy of allowing foreign cars to enter Malaysia with minimal or no restrictions.

10. It should be noted that Proton has to compete in its own domestic market against the likes of Toyota (10 million cars p.a.), South Korean car makers (5 million cars p.a.), German car makers (6 million cars p.a.) and others.

11. These companies can afford to lose on their cars in Malaysia and recoup in other markets. Apart from economy of scale, Proton cannot access foreign markets except those of poor countries with low Total Industry Volume.

12. Today the Government has no pride in national products. Imports are cheap and there are more consumers than producers. In democracy numbers count. So pleasing the more numerous is more important than national capacity of develop.