Monday, July 10, 2006

Proton-Perodua merger

According to motor industry analyst Professor Garel Rhys, a merger between the two Malaysian car companies will create a stronger entity, which would be better equiped to compete with the bigger foreign rivals.

I usually put up only the link to the article but it is no longer active now. Fortunately I was able to save it on my computer. Here is the full article which appeared in the NST, Friday June 30 2006.

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Industry expert: Proton-Perodua merger inevitable
By Kang Siew Li
siewli@nstp.com.my

MOTOR industry analyst Professor Garel Rhys sees a merger between national carmakers Proton Holdings Bhd and Perusahaan Otomobil Kedua Sdn Bhd (Perodua) as inevitable in the future to achieve success.

“I don’t think having two Malaysian car companies can be sustainable. Proton and Perodua have to become one company. A merger will create a strong company and help it to better compete with bigger, foreign rivals,” he told Business Times yesterday.

Rhys, a renowned motor industry expert and director of the Centre for Automotive Industry Research at the UK’s Cardiff University, is currently in Kuala Lumpur on a brief visit.

He also commended the move by Proton’s new management to sell its entire stake in Italian motorcycle maker MV Agusta SpA to Gevi SpA for e1 (RM4.63) as a wise one.

“There didn’t seem to be any synergies there. It (MV Agusta) was a company with small turnover but huge loss. As such, it was most unlikely that Proton could have turned the company around in anything under five years,” he added.

Rhys said Proton has a bigger responsibility to become a much bigger car player in the mass market.

“It must be focused on making cars. Much time, money and resources would have been diverted to MV Agusta (to turn it around) when really this is the time when Proton must develop itself as a carmaker and survive in the ever-more competitive world car market,” he said.

He said the National Automotive Policy (NAP) is a good framework for developing a sustainable car industry in Malaysia.

“It ultimately boils down to entrepreneurship and good management in order to make the plan work,” he said.

The NAP moots the idea of sustainability whereby car companies can make profits in a more liberalised and open market.

“It also indicates that for a period of time, the Malaysian Government will continue to offer financial help to local car companies to put them in a position to compete once the market is fully liberalised,” he said.

“However, that period has to be used to make them (local car companies) more efficient. It cannot be used as an excuse for long-term protection in the local car industr y,” he added.

Rhys reckons that a period of not more than seven years would be enough time for local car companies, namely Proton and Pe r o d - ua, to prepare themselves for full and open competition.

”I don’t think Proton has the luxury of a long period of protection. The world is different. It has got to prepare itself for sustainability and frankly, that’s what the NAP is all about,” he added.

“Malaysia could become one of the best locations for making vehicles in Asean.

And it does not have to be the only one because in the European Union, for example, you can make cars in the UK, Spain, Italy and Ger many,” he said.

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