Category Archives: Business

PROTON: A Note To The Cabinet Members

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PROTON: A NOTE TO THE CABINET MEMBERS

1-   Within 24 hours after the resignation of Tun Dr Mahathir as Proton’s Chairman, the Ministry of International Trade and Industry produced a damning assessment on Proton.

2-   It would probably be the first time in Malaysia’s history we see a senior minister giving an unfavorable feedback on a private-owned company, especially when the company is not on a collision course with the concerned minister.

3-   Nevertheless, it is mind-boggling to see at least 6 cabinet ministers being used by certain leaders for the purpose of trying to shame Proton. 

4-   According to the statement, the Government cannot continuously protect the national car maker; hence Proton needs to “graduate from protection”. Malaysia, in fact, should learn from South Korea and Japan. 

5-   In 2009, the United States of America injected USD150 billion in order to save General Motors from bankruptcy. Of course, this is not considered as protectionism and no case study should be made why the world biggest capitalist decided to take such decision.

6-   In 2014, Australia’s car industry was practically dead when the Government did nothing to save the industry. The planned exit by Toyota, Ford and Holden from the country will trigger a net loss of 200,000 jobs, with about USD29 billion wiped out from Australia’s GDP. Again, no case study has been made.

7-   A year ago, Khazanah took Malaysia Airlines private by injecting RM6 billion of public funds. It is indeed a bold and courageous move- as an introduction of the Proton 30 years ago.

8-   While Proton is bleeding by the millions of Ringgit for the past few years, it never had to resort to what MAS did where 6,000 workers being told they have to be sacrificed in order to save the national airline. It’s like telling a man being devoured by a tiger that he is really helping to preserve a treasured species.

9-   Maybe because of the failure to take such drastic measures that the minister believes Proton is being managed unprofessionally and led by incompetent team.

10- The airlines industry is never a core industry in Malaysia. The automotive sector is. The industry employs more than 550,000 people and contributes nearly RM30 Billion to a country’s GDP to date. It is because of that, the previous Government has directly and indirectly assisted Proton to the tune of RM13.9 billion since its inception.

11- However, the incentives given have not been wasted. Hopefully, this note will tell the person who made use of you to acknowledge all these facts.

12- First, Proton has fully paid off its RM800 million loans received from the Government by using internal resources.

13- Second, Proton has sold more than 4 million cars. It means that they have been taxed by the Government. Since its founding, Proton has paid approximately RM24 billion in taxes.

14- Third, by having Malaysians buy national cars instead of imported ones, the capital outflow prevented by Proton is estimated to be around RM 120 billion if we take RM30,000 as an average price per car. This money is being circulated within our economy.

15- Monetarily, Proton is a good investment for the economy.

16- How about Proton’s contribution through job creation and transfer of technology? More than 77,000 people are employed directly by Proton. Additionally, there are 400 vendors supplying to the national carmaker. Proton is the most active company in the country when it comes to Research and Development. Today, they have registered almost 2,800 of Intellectual Property Rights (IPR).

17- The minister himself admitted that when he said a number of Proton vendors have approached him. Instead of fixing what really caused Proton’s market shares to dwindle, the ministry gave soft loans to alleviate vendors’ burden. This, however, does not solve Proton’s problem.

18- How about the unfair competition in the market where foreign cars get exemptions when they do not conform to our specifications? How about the definition of national car where foreign car makers can only have 40% local content to benefit from the tax-free status of national cars? How about the decision made by the Government to allow almost unlimited import of foreign cars from countries which are the same countries that made it bureaucratically difficult for our cars to enter their market?

19- All these policies have reduced foreign car makers cost which give them advantage over proton. Is this fair? Where is the solution?

20- The only solution that the Minister had for all these problems is to ask Proton to get a strategic foreign partner. To them, the locals are deemed unfit, unprofessional and incompetent. Therefore, we must sell our controlling stakes in Proton to foreign marques.

21- Perodua runs by a different model. Although its financial performance should be commended, none of the cars are 100% built by them. Proton, on the other hand has several cars that are 100% built by Malaysians. When Proton Saga was introduced in 1985, it has 19% locally made components. 15 years later, Proton Waja was built using almost entirely by locals.

22- Every country will protect their national car even in developed countries. In South Korea, all foreign cars must be conducted under Korean testing standards which usually come at a very high cost.  In Japan, they carve out the profitable and high volume market in minicars below 660cc. In Japan’s unique driving environment, it is very unlikely that a foreign company would want to build such car. In China, all foreign car makers have to partner with a state-owned company because nothing happens without the approval of the government.

23- Here in Malaysia, protectionism is deemed a negative thing.

24- It is strange that when an unsustainable business model like 1MDB posted a net loss of RM665.36 million for the year ended March 31, 2014, and having a serious cash-flow issues, the cabinet members decided to give almost RM1 billion standby credit facility.

25- But when Proton requests for assistance to reimburse its R&D cost and soft loans, some ministers ridicule and humiliate it. It is very strange, indeed.

Mat Rodi

(VERSI BAHASA MELAYU)

PROTON: NOTA KEPADA MENTERI KABINET

  1. Kurang daripada 24 jam selepas perletakan jawatan Tun Dr Mahathir sebagai Pengerusi Proton, Kementerian Perdagangan Antarabangsa dan Industri telah mengeluarkan kenyataan terhadap model perniagaan Proton.
  1. Kemungkinan ini adalah kali pertama dalam sejarah di mana seorang menteri kabinet memberikan kenyataan yang begitu kritikal berkenaan dengan sebuah syarikat swasta.
  1. Berikutan itu, tidak kurang 6 menteri kabinet yang lain turut memberikan pandangan yang sama.
  1. Menurut kenyataan menteri tersebut, industri automotif tidak seharusnya dilindungi dan Proton juga perlu belajar untuk berdikari. Jika Korea Selatan dan Jepun boleh, mengapa tidak Malaysia?
  1. Pada 2009, kerajaan Amerika Syarikat telah menggunakan dana awam sebanyak USD150 billion untuk menyelamatkan General Motors daripada muflis. Sudah pastilah tindakan tersebut tidak akan dianggap sebagai ‘perlindungan’ dan tiada kajian yang dibuat untuk memahami mengapa tindakan sedemikian dilakukan oleh sebuah negara yang begitu terkenal dengan konsep ‘pasaran terbuka’.
  1. Pada 2014, industri automotif Australia telah pun terkubur berikutan keputusan penutupan kilang kereta Toyota, Holden dan Ford pada 2017. Dianggarkan lebih 200 ribu pekerja akan hilang pekerjaan dan lebih USD29 billion akan hilang daripada KDNK Australia. Sekali lagi, tiada kajian yang dibuat.
  1. Pada tahun lepas, 2015, Malaysia Airlines telah disuntik RM6 billion dana awam dalam usaha menyelamatkan syarikat penerbangan nasional. Tindakan ini adalah suatu tindakan yang berani sebagaimana pengenalan Proton pada 30 tahun yang lepas.
  1. Walalupun Proton kerugian jutaan ringgit sejak beberapa tahun yang lepas, tetapi Proton tidak pernah melakukan ‘strategi MAS’ di mana 6,000 pekerja ditamatkan perkhidmatan dalam usaha menyelamatkan syarikat tersebut.
  1. Kemungkinan disebabkan itu, maka Proton dianggap oleh menteri-menteri kabinet sebagai tidak professional dan diketuai oleh barisan pengurusan yang tidak cekap.
  1. Industri penerbangan bukanlah penggerak ekonomi utama di Malaysia berbanding dengan industri automotif. Industri ini menggaji lebih 550,000 pekerja dan menyumbang hampir RM30 billion kepada KDNK negara. Atas sebab inilah kerajaan terdahulu memberikan bantuan dalam pelbagai bentuk bernilai RM 13.9 billion.
  1. Walaubagaimanapun, insentif dan bantuan yang diberikan tidak hilang begitu sahaja.
  1. Pertama, Proton telah pun membayar balik pinjaman RM800 juta dari kerajaan.
  1. Kedua, Proton telah menjual 4 juta kereta dan hasil jualan ini dikenakan cukai. Sejak penubuhannya, Proton telah membayar cukai sebanyak RM24 billion kepada kerajaan.
  1. Ketiga, melalui pembelian kereta nasional, aliran wang keluar berjaya dikurangkan. Jika diambil harga purata sebuah kereta adalah RM30,000, ia bermakna sejumlah RM120 billion aliran wang yang kekal mengalir dalam pasaran ekonomi tempatan. Jumlah ini- jika dibiarkan mengalir keluar melalui pembelian kereta asing, pasti akan memberi kesan kepada defisit kerajaan.
  1. Sudah jelas dari sudut wang ringgit, pelaburan yang dibuat oleh kerajaan adalah amat berbaloi.
  1. Bagaimana pula halnya dengan sumbangan Proton dari aspek lain? Untuk rekod, lebih 77,000 jumlah pekerjaan yang diwjudkan melalui Proton. Tambahan dari itu, terdapat 400 vendor yang bergantung kepada Proton. Hari ini, Proton merupakan syarikat tempatan yang paling aktif dalam mendaftarkan hak cipta dengan 2,800 IPR (Intellectual Property Rights).
  1. Dalam kenyataan menteri tersebut, beliau mengakui terdapat sebilangan vendor yang memerlukan pertolongan. Namun, di sebalik cuba membantu memulihkan Proton, kementeriannya telah memberikan pinjaman mudah bagi meringankan beban. Sungguhpun ia tindakan yang terpuji, tetapi ia masih tidak menangani isu sebenar.
  1. Bagaimana pula dengan persaingan yang tidak adil di mana kenderaan luar boleh memperolehi pengecualian jika tidak menepati piawaian negara? Bagaimana pula dengan definisi mudah ‘kereta nasional’ yang hanya memerlukan 40% komponen tempatan bagi membolehkan kenderaan luar menikmati status bebas cukai kereta nasional? Bagaiman pula halnya dengan keputusan kerajaan untuk membenarkan kenderaan luar masuk ke dalam negara sedangkan negara tersebut mengenakan syarat yang ketat kepada Proton?
  1. Kesemua ini tidak diendahkan. Sebaliknya, kementerian beliau tetap mencadangkan agar Proton mempunyai rakan strategik asing. Nampaknya kemampuan tempatan masih belum mencukupi. Oleh itu Proton haruslah menjual pegangan majority kepada syarikat luar.
  1. Bagaimana pula dengan Perodua? Perodua adalah model yang lain. Prestasi kewangannya membanggakan tetapi tidak ada model Perodua yang dihasilkan 100% oleh warga tempatan. Sebaliknya Proton mempunyai beberapa model yang dibina 100% daripada lakaran sehinggalah ke jalanan.
  1. Setiap negara yang mempunyai kenderaan nasional pasti akan melindungi pasarannya. Ini termasuklah di negara maju. Di Korea Selatan, setiap kenderaan asing perlu menjalani ujian mengikut piawaian mereka yang biasanya menelan kos yang tinggi. Di Jepun, mereka telah mengasingkan pasaran kereta bawah 660cc hanya untuk kenderaan mereka sahaja. Ini adalah pasaran yang lumayan. Di China, setiap pengeluar kenderaan asing perlu menjalin usaha sama dengan GLC mereka. Ini adalah apa yang berlaku.
  1. Sebaliknya di Malaysia, perlindungan dianggap sebagai sesuatu yang pelik dan jijik.
  1. Adalah amat menghairankan apabila sebuah model perniagaan yang tidak ‘mapan’ seperti 1MDB yang telah kerugian RM665.36 juta pada 2013 dan menghadapi masalah aliran tunai yang serius, barisan kabinet memberikan bantuan kredit sebanyak RM950 juta.
  1. Tetapi apabila sebuah syarikat kereta nasional membuat permohonan menuntut dana R&D dan pinjaman mudah, terdapat menteri kabinet yang memperlekehkan syarikat ini.

MatRodi

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SARING SEBELUM MERENG

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Semenjak saya menulis di sini pada Mac 2013 sehinggalah ke Disember 2014, sudah 47 artikel yang ditulis. Ini tidak dicampur lagi dengan artikel-artikel yang disiarkan di portal mStar, akhbar The Star, FB MatRodi serta tulisan yang tidak pernah disiarkan.

Dubook Press- sebuah syarikat penerbitan buku cool telah menyuarakan hasrat untuk membukukan artikel-artikel saya. Oleh itu terhasillah buku – Saring Sebelum Mereng.

Secara jujurnya saya tidak menganggap ini sebagai ‘buku sulung’ saya tetapi lebih kepada koleksi artikel.

Apapun, ini adalah satu seruan demokratik yang mengajak masyarakat untuk memilih pendirian tanpa perlu memihak.

Ada 37 artikel kesemuanya dan pelbagai isu dikupas, Antaranya adalah isu hutang negara, defisit belanjawan, polisi BR1M, cukai GST, jurang kekayaan, krisis air Selangor, pasukan bola sepak JDT, urus niagra Panda, Malaysia Airlines, KLIA2 dan bermacam lagi.

Buku ini bakal berada di rak-rak kedai buku utama di seluruh Malaysia menjelang akhir bulan ini. Pembelian online juga boleh dibuat di DubookPress pada bulan Januari 2015.

Buku ini sudah pun dilancarkan dua hari yang lepas sempena Pesta Buku 1Malaysia di Malaysia. Pembaca MatRodi yang mahu mendapatkan buku ini bolehlah ke PWTC sehingga 14 Disember ini. Harga senaskah adalah RM20.

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Selamat Membaca!

MatRodi

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MAS RESTRUCTURING

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In light with the recent development of MAS, I re-edited my article written five months ago, which I believe might be relevant in today’s context. Kindly read.)

To begin with, there aren’t many government-owned airlines in the world. There is none in the United States and such entities are becoming rarer in Europe. Sooner or later, that trend will spread to Asia, inevitably in Malaysia. Maybe only in the rich Gulf countries such airlines can exist.

Malaysia is not as rich as Gulf countries where money is almost unlimited. Therefore the people, especially the taxpayers have plenty of reasons to be mad at the loss-making GLC’s. There is no genuine excuse for their losses. MAS is one of the blue-blooded Malaysia GLC’s that put prestige far above profit. However, such practice is unbecoming considering the losses can be billions of Ringgit. Maybe they think- why should they care since it’s not their money.

For the last 7 years, the national carrier has made three cash call exercise for the amount of RM7.3 billion only to accumulate losses RM4.1 billion in three years’ time.

This has happened in spite of in 2013, the pilots are flying more and the planes are flying 12 hours daily from eight hours previously. MAS achieved its best ever load numbers (81%), even beating rival SIA (79%). MAS flew additional 4 million passengers last year, making the total passengers of 16 million.

So basically, they have added 20% more capacity and passengers whilst using the same number of aircraft and people, and therefore the staff productivity is up by 20%.

Therefore, It is mind-boggling to see MAS has incurred losses amounting RM 5 million per day. To make things worse, more than 1000 flight cancellations have been made since the tragedy of MH370.

No Wonder lately there are several options being proposed to restructure the airlines. On top of that- should the company file for bankruptcy, then operate under a new company and with the same name just what Japan Airlines (JAL) and American Airlines did?

Admittedly, bankruptcy is one of the fastest ways to turn it around. But it is not as easy as it sounds. When the JAL filed for bankruptcy, It has shed all its jumbos, cancelled unprofitable routes, reduced staff by a third, persuaded its unionised pilots and staff to take big pay cuts, and slashed its pension payouts by up to half.

Given the politically sensitive government at the helm, obviously this is not an option as far as political backlash is concerned. In fact, MAS has the glaring disadvantage of having several unions which can hold the company to ransom. Do you expect these unions to be happy if they are being told that the destruction of their jobs will be good for the company in the long term? How do you tell a man being devoured by a tiger that he is really helping to preserve a treasured species?

Historically, the unions  can even force the government to rescind the share-swap agreement.

Therefore, it is the only right thing for MAS to have a gradual and sustainable recovery model through harnessing the assets and keeping the people that they have.

Well, how do you that? When a business is faced with stiff competition, it can either increase prices or reduce the cost. However price can only be increased to a certain extent. MAS can’t price itself more than Emirates and SIA because if they do, then no one will fly with them.

In fact, MAS has to dump its fare to ensure they will not be out of the race. Already their market share in KLIA was slashed by half from 54% to 28% and they are not the No 1 carrier in their home country.

Given such scenario, it would be better to reduce costs and minimise the increase in price. All its cost can be examined to determine which are truly necessary, which cost can be reduced, which service can be curtailed or modified etc,etc.

For any restructuring plans to work, serious problem must be addressed first. MAS must cut off the cancerous arms and treat the bleeding organs before undertaking any prescriptions.

There must be something wrong with MAS’ cost structure given for every available seat per kilometres, they lose 5.6 cents.

MAS’s organization is said to be convoluted by having 11 divisions, 210 business divisions and more than 100 senior executives. Clearly, wastage happened at the senior management level.

Next, wastage at the supplier level. The issue of lopsided procurement contracts obviously referring to the catering contract and the practice of preferred contractor must be dealt with. We were told by terminating a catering contract, MAS can save about RM300 million per year.

Some might say MAS is overstaffed. MAS with about 100 aircraft has almost 20,000 employees while AirAsia with 300 planes has only 9,000 staff. The reason is, the number of pilots and cabin crew can’t be the same between these two companies since the working rules are different.

Due to this, some of these airlines can afford to outsource their front end services and engineering works. On the other hand, MAS do most of them and that is why the headcount gets big.

But essentially, it is about getting maximum output from the 20,000 people. We must realize that being big is not the cause of MAS’ problem. The size of the workforce, connectivity, and network may actually be one of MAS most important strengths.

The best way to restructure MAS is not through financial engineering such as asset stripping or de-list and re-list exercise. MAS has enough cash or capital. Khazanah, being the owner, may not necessarily have to invest more money. It would be better if they restructure the allocation of resources by tweaking MAS’ business model.

The most radical yet sensible approach is to split up MAS to become two entities. Currently Firefly is not a serious competitor to AirAsia or Malindo. Unless Firefly is being transformed from a mere community operator into a formidable low-cost carrier with large fleets and huge connectivity, then MAS can consider splitting the current airline into a hybrid domestic/regional airline like Malindo Air and a premium international airline.

The market has changed for the past 10-15 years where 80% of air travellers want to fly budget. The growing middle-income class in Malaysia and Asean region is very price sensitive. Therefore, it is not surprising to see that Malaysia’s air transport premier market is very small.

For that reason, MAS has to cater the 80% market rather than squeezing its yield in the 20% market. There is no way that MAS can compete against Air Asia, at least domestically and regionally. While it may be true Air Asia enable more people to fly, but it does at the expense of MAS passengers.

The ‘split-up’ move is also necessary because you can’t have two cost structures under one business entity and it is foolish to have a different brand proposition under one name/brand.

The icing on the cake from this move is that, by splitting up MAS, it will eventually split up the ‘powerful’ unions. MAS could enjoy the same advantage like profitable airlines such as Air Asia, Emirates and SIA that have no unions. MAS will be able to run the business uninterrupted by the demanding unions. For the record, MAS currently has 7 unions.

Imagine a hybrid low-cost domestic airline that flies within three-hour radius destination together with MAS hospitality and experiences to compete with Air Asia. And this hybrid airline can become a feeder airline to the premium international airline. Since both airlines are flying from KLIA and KLIA2, the possibility is endless.

MatRodi

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