Operations Review PROTON’s MPV, the Exora, goes into production. PROTON 2009 ANNUAL REPORT 81 Operations Review The Group also anticipates strong local demand for the Persona and Saga, while export volume is expected to increase especially for the Exora with plans already in place to introduce this vehicle to the ASEAN market in the second half of 2009. Furthermore, with the expansion of the Overseas Manufacturing Plants in China and Iran, the export business on completely–knocked–down (CKD) vehicles is expected to increase as well. New robots and more sophisticated handling equipment were installed successfully with minimal line disruptions. Previous PROTON production systems and Total Productive Maintenance (TPM) activities have already resulted in the main plant having one of the lowest downtimes in history and similar activities were implemented successfully in the Casting and Engine Transmission Department. Much effort was taken to maintain this. An increasing number of model lines or equipment was established through ‘yokoten’, a Japanese term which essentially means duplicating. The next stage in these intensive improvement activities will be the implementation of ‘Kobetsu Kaizen’ (which means ‘Focus Improvement’) and the usage of Overall Equipment Efficiency (OEE) as the de facto parameter to measure equipment efficiency. In view of PROTON’s commitment to improvement, the Manufacturing Division has started implementing the world-renowned practice of ‘Genba Kanri’, another Japanese term this time referring to ‘Shopfloor Control’. This is to reflect how the division is continuously improving itself by benchmarking PROTON against world-class industry players. We shall aim to reach level 4 (which means sustainable world-class level in shop control) in ‘Genba Kanri’ by the year 2011. 82 Operations Review State-of-the-art equipment at our manufacturing facilities in Shah Alam. PROTON Shah Alam The main plant and the MVF are located in Shah Alam, with the combined total installed capacity for both being 200,000 units per year. The casting, engine and transmission plant is also in Shah Alam and has the capacity to produce 180,000 units of CamPro engines annually. The main plant has been producing 6,000 units of the Saga each month. The Perdana, Waja, Wira and Arena are also produced here but in a much smaller volume. The current production of the Wira is exclusively for the taxi market but the Wira will be discontinued by around July 2009. Thereafter, the taxi market will be supplied with the new PROTON Saga NGV which is a 1.6 litre engine installed with a specially designed NGV kit. Preparations are also underway for a minor cosmetic enhancement to the new Saga for a special edition to be introduced in the market by August 2009. In the same month, the Group will also start producing the Saga for the Australian market. PROTON 2009 ANNUAL REPORT 83 Operations Review The MVF was also given the task of producing the Exora. Produced in 18 months, this was deemed an outstanding feat in the automotive world. Since the plant had previously been manufacturing the Waja, all facilities had to be either modified or newly installed with equipment to manufacture the MPV. Daily meetings attended by top Management were held to ensure that the manufacturing decisions were made quickly and in a decisive manner. Comprehensive online training and quality improvement teams were formed using the PROTON Production System (PPS) as the main driver. All cars had to also undergo tests to ensure that there was no rattling or other noise defects. Featuring an automatic transmission when it was first introduced, PROTON has in July introduced a manual version of the Exora to cater especially for the Indonesian market. The monthly production volume is targeted at 3,000 units per month and is expected to increase when export to Indonesia begins. Following its introduction in Indonesia in July 2009, the Exora will be launched in Singapore, Brunei and Thailand. PROTON Tanjung Malim PROTON Tanjung Malim is the largest manufacturing and assembly plant within the Group. The plant complex, which sits on 1,500 acres of land in the state of Perak, facilitates the processes of engine machining, stamping, body assembly, painting and final assembly. The plant has a capacity of 150,000 units per year and can operate on a two-shift basis. However, due to the global economic crisis, since December 2008, the plant has been running on one shift. By switching to one shift, PROTON was able to relocate excess manpower to the MVF in preparation for the production of the Exora. As such, this enabled the Company to minimise cost and retain skilled personnel. 84 Operations Review To boost sales in the wake of economic uncertainty in the domestic market, two up-graded versions of existing models were introduced. The first was the Persona SE, which features a more sporty style and was introduced in September 2008. Current production of the Persona SE is estimated at 500 units per month. The second upgrade was the Satria Neo High Line version which is equipped with a CamPro CPS (Cam Profile Switching) engine. The improved, now trendier Satria Neo CPS comes with a stylish new front and rear bumper, as well as a new leather interior. As it is exclusively targeted for a limited market, the production volume is only at 60 units per month currently. Plans for the Persona NGV and Persona cosmetic change productions are already on the drawing board and mass productions are expected to begin by the end of 2009. PROTON’s plant in Tanjung Malim is the largest of the Group’s manufacturing facilities. PROTON 2009 ANNUAL REPORT 85 Operations Review Improving plant operational efficiencies will be a key focus in the next financial year. Prospects Total production volume for the next financial year is forecasted to increase by 3% to 162,000 units. The single digit increase is a result of the cautious tone adopted by the market due to the global economic crisis, which has undoubtedly impacted the world car market. As the overseas market has been severely affected, approximately 90% of the volume is being allocated for the domestic market, with the remaining 10% reserved for export. Production volume is expected to utilise less than 50% of PROTON’s installed plant capacity and all plants are expected to operate on a one-shift basis in the new financial year. 86 Operations Review Production of the Exora is expected to receive a further boost once launched into the Indonesian market. The loss of volume has motivated the Group to further improve operational efficiencies and to enhance cost reduction activities. PROTON is confident that all the proposed cost reduction initiatives will be carried out accordingly. On the other hand, demand for the Saga is expected to stablise in the domestic market, while an increase in production volume is anticipated when exports to Australia and the Gulf Community Countries (GCC) begin. The cosmetic change and special edition models also provide a positive outlook for the Saga. The Group also forsees that the high number of bookings for the Exora would result in high volumes in excess of 3,000 units a month. Export to the Indonesian market slated for July 2009 will further boost production volume. The plan for the new financial year is to produce 35,000 units and we expect this target to be achieved, if not, exceeded. While demand for the Exora is on the rise and demand for the Persona and Saga is stabilising, the corresponding requirement for the CamPro engines is as per the last financial year. The CamPro engine component machine and assembly capacity expansion plans are also constantly being reviewed and we anticipate that the current capacity of 180,000 units will be sufficient to cater for the coming year. PROTON 2009 ANNUAL REPORT 87 Operations Review LOTUS Operations Against the backdrop of profitability in the previous During the course of the fiscal year, Lotus produced financial year, Lotus was confident of further 2,202 vehicles compared to 2,649 units in the previous improving its performance in 2009 in line with its year. This included the production of 388 Tesla all- Strategic Business Plan before the turn of events electric roadsters. in September 2008 which culminated in the global financial and economic crisis. In order to improve sales, Lotus introduced new derivatives to refresh its current model line-up which Nevertheless, for the fiscal year ended 31 March 2009, include the Europa SE, Exige 260, 2-Eleven 190 as well Lotus increased its turnover to £110m or RM574.8m as the restyled 2010 model year Exige launched at the compared to £108m or RM564.3m in the year before. March 2009 Geneva Motorshow. As a result, Lotus This was underpinned by the diversity of the Lotus saw better global market penetration compared to business driven by the growth in third party high its competitors in most territories. technology engineering consultancy revenue, the ability of the Cars Division to act swiftly to negate the In July 2008 Lotus’ first new model in 13 years, the impact of the global downturn and the contribution Evora, was unveiled at the British International of Lotus Light Weight Structures. Motorshow to international acclaim. The world’s first mid-engine 2+2 supercar had its formal press As a net exporter of its products and services, a launch in Scotland in May 2009 resulting in the weakening sterling at the time had benefited Lotus Evora dominating the global media headlines. and acted as a self-hedging mechanism for non- sterling denominated costs. Conversely, however, the volatile movement of the sterling against world currencies also resulted in substantial unrealised foreign exchange losses which together with provisions for bad debts, pension protection levy and asset impairment contributed adversely to the net loss posted.