Sunday, September 17, 2006

Motor Industry: don't ridicule Proton

Motor Industry: don't ridicule Proton
Brian Edwards
Tuesday 22 August 2006

Top Gear famously joked that Proton "make their cars in the jungle" (actually, Proton have some of the most modern manufacturing plant in the world). The bottom line is that in the year that Rover finally died, Proton made a profit. And the group is introducing models at a rate that, for its size, far outstrips the larger makers.

It's almost a game to poke fun at motor manufacturers based in emerging markets but big manufacturers should pay more attention to some of them: after all, the awards won by first Japanese then Korean manufacturers have demonstrated that the big makers are vulnerable on design, quality and value and that it's not all about the price.

Of course, there's some reasons for the joke: for decades, emerging markets manufacturers have not been manufacturers at all: they have been screwdriver plants for redundant models from large manufacturers.

So Proton's range has historically been aged designs that manufacturers such as Citroen and Mitsubishi had replaced.

Leaving aside all the politics attached to Proton, and those politics have from time to time threatened to sink it, Malaysia's national car manufacturer has quietly reprofiled itself and it has done so during the times when its market conditions have been most difficult.

It is true that Proton's domestic market has been artificially bolstered by a protection regime that many both inside and outside Malaysia regard as offensive and it is true that Proton's biggest market by far is its domestic market. But although that helped it gain a leg up during its formative years, even within Malaysia Proton's prices are not so different from competitors models. Ultimately, the difference usually comes down to a few pounds difference in a hire purchase repayment each month.

Proton's biggest problem is an image issue, an issue it is addressing. Out are going Malay words as names: names such as Wira and Waja are meaningful at home but likely to be ridiculed overseas. The Crescent and Star from the Malaysian flag were replaced in the company's logo after 11 September 2001: there was feedback that foreign customers would not buy a car that bore insignia based in the worship of Islam (a tiger appears instead). But also the history of cobbling together redundant metal such as the Proton Saga with parts of dubious quality (taxi drivers don't open the windows to pay their tolls because it might not roll up again) has caused problems.

But get into the back of a KL taxi and it will almost certainly be a Proton Saga - the paint will be tired, the seats will not spring properly and the suspension will grind like a grinding thing but ... that taxi will probably have done a quarter of a million kilometres in some of the most hostile conditions in the world: not just KL traffic (which is actually not as bad as many say) but in heat and humidity that kills cars. And some taxi drivers take such care of their Sagas that they run sweetly, the suspension does not bounce wildly and the car is quiet to travel in. Rarely could one say that about, say, London taxi that has done similar mileage unless the driver has taken extra care.

But south of the border, in Singapore, there is hardly a Proton to be seen. Singaporeans look down on the car made next door. And the same in Thailand and Indonesia.

Yet, in the current range only the Saga (which meets the political need to put a car within reach of the people who do live in the jungle) and the Perdana are not original Proton designs.

The recently introduced Savvy is a small car that rivals, on merit, many small cars - and it has that admirable quality of mechanical simplicity so that it can be sold to countries where maintenance of motor vehicles is often left to a mechanic whose toolkit consists of three spanners and a hammer. Why bother? In KL, a young woman has just opened a bar: just two generations ago, her family were headhunters. Even now, from her village to the nearest road is a six hour walk. No packhorses, mules or motorbikes can be used because the only way across two gorges is across rope bridges. A car that needs complex diagnostics and fancy repairs is, simply, no use.

The new Satria Neo is, with the exception of part of the transmission which is inherited from the previous Mitsubishi Colt based Satria, a Proton from the ground up.

The Gen 2 is pure Proton, as is the Waja. The Wira is gradually taking on more Proton characteristics with each model year. The Arena "lifestyle" vehicle is a pickup that is a bit of a mix of bits from all over but that is the last model in the range that such a comment can be levelled at.

In the past year or so, Proton has introduced the Savvy, the Satria Neo and new varients of the Waja (including a stretched version) as well as updating other models.

It has disposed of its Italian motorcycle subsidiary which was a cash drain, creating a sizeable stop loss and some political sulking into the bargain.

And it has introduced a raft of new models at Lotus.

Ah, yes, Lotus. That's another story. Top Gear drool when they get the chance to drive a Lotus. They purr over other exotica but get deeply, almost primaevaly, excited by the little cars from the mustard fields of Norfolk (and yes, Top Gear does make fun about where Lotus are made, too). Proton cars have improved because of the brave decision to buy someone who knew how to design cars properly. So Proton cars are light, not overloaded with buttons and have free-revving engines sitting in chassis that go where the driver points them. Of course, a Proton Savvy is not a Lotus - but then again nor are all the cars from other manufacturers that Lotus have "sorted" over the years. Remember that both Ford and Vauxhall (part of GM) sought cachet and credibility by having "Lotus" models with their Cortina and Carlton respectively. And Vauxhall even produces a low volume two seater that is a consumer friendly version of a Lotus two Elise.

The Satria Neo has cost a reported RM500 million to develop. That's a lot of money for a small company. Yet its y/e 2006 figures show something that Ford and GM would kill for: there is no red ink despite that development and tooling costs.

Yes, if you really want to poke fun at cars that are relatively simple, then feel free. But remember one thing: Proton is kept afloat by its customers and it's not considering selling Lotus.

Ford is kept afloat by its bankers and it wants to sell Jaguar and possibly Volvo; GM is kept afloat seemingly by the power of prayer and it has few discrete business units it could sell.

Increasingly, if you want your car manufacturer to be around long enough to honour the warranty, it's beginning to look as if Proton might just be a better bet than some of the names people don't joke about.

Bear in mind, too, that an estimated 60% of Porsche profits come not from their famous sports cars but from their SUV: and sitting in the wings is a Lotus SUV designed and built according to Lotus principles. But it's been developed with Proton which will sell a less racy version of the same product in certain markets. And the design and prototype costs have already been accounted for in the 2006 accounts. As George W Bush would say "Bring it on."

That'll wipe the smile of a few faces.

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