Innovation in Motion
PROTON ANNUAL REPORT 2009 Success. Challenges. Responsibility. PROTON Holdings Berhad (Company No.623177-A) UNITED KINGDOM
TURKEY SYRIA Cyprus CHINA Lebanon IRAQ EGYPT IRAN Cairo Kingdom of Bahrain Qatar TAIWAN United Arab Emirates BANGLADESH Oman SAUDI THAILAND ARABIA Yemen
MALAYSIA BRUNEI
SINGAPORE
INDONESIA
MAURITIUS AUSTRALIA
SOUTH AFRICA
Innovation in Motion
The essence of PROTON lies in its cars. With the Group striving to reach new heights with the right car, for the right market, at the right price and at the right time, PROTON is truly Malaysian ‘Innovation in Motion’ with global presence. By constantly innovating itself, PROTON continues to build a presence in domestic and international markets.
EVORA – the first new model to be introduced by LOTUS in 13 years, was unveiled at the British Motorshow in July 2008 to rave reviews from the foreign media.
EXORA – the country’s first homegrown MPV, was officiated by Prime Minister YAB Dato’ Sri Mohd Najib Bin Tun Abdul Razak in the presence of ‘Bapa PROTON’ Tun Dr Mahathir Mohamad. A Life Companion
PROTON is synonymous with building cars and mobilising Malaysians. It has brought the country forward by leaps and bounds in the automobile industry. From our first ever production, the Saga, to the latest launch of the Exora - Malaysia’s first home-grown MPV, the brand has indeed been faithfully planning, designing, and manufacturing cars with Malaysians’ needs and wants in mind.
At PROTON, it is our vision to become Asia’s premier automotive brand; a brand that connects with people and provides products which become life companions.
PROTON has a unique ability to understand people’s needs and provide the right product with efficient service and genuine quality. We build cars with care for passenger safety and genuine quality in order to provide high durability and lifelong companionship. Our wide portfolio ensures that we meet smart personality needs in terms of design, power and size for different age groups so PROTON can be the right companion for life.
It is an integral part of our business and our brand, without which, we would not have either share of market or share of heart.
1985 marked a momentous year in Malaysia’s history – it was the year in which the country’s first national car was born.
Today, PROTON has emerged as the only full-fledged car manufacturer in the country. PROTON’s current line- up includes the Saga, Iswara, Wira, Satria, Perdana, Putra, Satria GTi, Juara, Waja, Arena (Jumbuck), Gen.2, Savvy, Satria Neo, Persona and our very latest, the Exora.
PROTON not only commands a substantial share of the domestic market for passenger cars, but over the years we have also been building distribution networks in key market centres across the four regions of South East Asia, the Middle East, United Kingdom/Western Europe and Australia, where PROTON has become a hit with many car buyers.
The imperative factor for success lies in the people and the products. PROTON employs a brand philosophy that spells out Companionship.
PROTON’s core values of Companionship are in the areas of placing customers first, even before profits. Customer satisfaction and lifelong relationships stay at the heart of our organisation. At PROTON, we nurture the power of humanity. Our attitude remains humble, approachable and thoughtful. Togetherness and Teamwork make us stronger, better and more proactive. We work towards creating a unique bond between our staff, customers and our product promise – “Life Companion”.
PROTON constantly strives for manufacturing excellence and continuous quality improvements, while introducing cost reduction initiatives and vendor rationalisation plans to become a more dynamic and competitive car manufacturer.
Today, we are able to differentiate ourselves from the others, stand out from the competition, influence customers’ purchase decision, build customer loyalty and as a result boost the company’s financial performance, image and brand.
PROTON 2009 ANNUAL REPORT 1 Corporate Mantra & Core Values
The PROTON Way
PROTON employees are dedicated to the Group’s long-term success. Every PROTON employee shall operate under the Group’s shared values and rely on these values to guide their behaviour with each other and the customers. These values form the foundation of how we work and conduct business.
2 Corporate Mantra & Core Values
Core Ideology
Audacious Goal Purpose Driving Malaysia’s transformation into a leader in We are a passionate group of people working technology and quality. together, creating exhilarating products and services for global markets, synonymous with great styling, Vivid Description innovation and leading technology. We deliver innovative and superior quality products and services. Our brands inspire confidence and pride.
Core Values
Quality Teamwork We make products that work the first time, every We trust, respect and share knowledge to foster time. teamwork at the workplace.
Customer Focus Speed Customers are the source of our income. We deliver We have a “can-do” attitude and will not rest until on our promises to our customers’ satisfaction. the problem is solved. We have an inherent sense of urgency in everything we do. Innovation We challenge convention, always seeking new and Caring better ways of doing things. We view change as As a responsible corporate citizen, we invest in safety, opportunity. health and the environment.
PROTON 2009 ANNUAL REPORT 3 PROTON’s Policies
Environmental, Health and Safety Policy
The Company’s mission is to strive towards excellence • Provide adequate information and assistance in all aspects of PROTON’s operations. In achieving to our employees and our neighbours to avoid our goal, it is necessary to promote and protect the unacceptable effects on the environment. health and safety of PROTON employees and ensure that the environment is unharmed. To assist the Company in achieving our goals, we shall work together and towards this end, employees The Group is committed to providing a conducive, shall:- safe and healthy working environment for our • Abide by all rules and regulations concerning the employees and to ensure this, it is our policy to:- workplace; • Take responsibility for the safety and health of • Utilise all the facilities provided by the our employees; management in a safe and proper manner; • Provide the appropriate resources; • Maintain good work practices; • Take all action necessary to remedy any non- • Actively participate in all the Environmental, compliance; Health and Safety (EHS) programmes. • Monitor and maintain high standards in environmental protection as well as health and This is our objective and it is our intention to put safety measures. this EHS Policy into action and to make it our way of life. In implementing the Company’s policy, we shall, where reasonably practicable:- Environment, health and safety are our priority. • Comply with all rules and regulations concerning the environment, health and safety; • Provide all the necessary facilities and equipment for the employees; • Actively promote programmes for the employees to instill awareness for the safety and health of the employees, our business associates and the public;
4 PROTON’s Policies
Quality Policy
To achieve the above commitment, PROTON will:- • Ensure quality as the Number One work ethics in all operations; • Establish an effective and efficient Quality System based on the requirements of ISO 9001:2008 standards; • Provide adequate skills and knowledge to all levels of personnel through systematic and structured training programmes; • Provide a culture and environment of continuous learning, improvement and innovation towards total quality excellence; • Provide a conducive, safe and healthy working environment in which people like to work and prosper.
PROTON 2009 ANNUAL REPORT 5 PROTON 2009 Annual Report
Contents
02 Corporate Mantra & Core Values 04 PROTON’s Policies 10 Financial Calendar 11 Key Financial Indicators 12 Summary of Financial Highlights for Five Years 16 Corporate Profile 20 Awards and Recognition 22 Corporate Information 24 Group Operations 26 Board of Directors 28 Profile of Directors 36 PROTON Group Management Committee Members 38 Other Senior Officers 42 Chairman’s Statement 58 Managing Director’s Review
6 68 Operations Review 138 Statement on Corporate Governance 156 Additional Compliance Information 160 Statement on Internal Control 166 Risk Management 172 Calendar of Events 2008 - 2009 180 Statutory Financial Statements 283 Shareholding Statistics 286 Properties Owned by PROTON Group 292 Share Price and Volume Traded 293 Notice of Annual General Meeting 295 Statement Accompanying the Notice of Annual General Meeting Form of Proxy
PROTON 2009 ANNUAL REPORT 7 Passion to Innovate Passion to Innovate By pushing the envelope of innovation, PROTON strives to build vehicles that go beyond the expected.
Innovation in Motion Financial Calendar
Announcement of Unaudited First Date of Payment of the interim 27 Aug 2008 (1st) Quarter results for the period 14 Jan 2009 dividend of 5 sen (less 25% ended 30 June 2008 income tax) for the financial year ended 31 March 2009 Fifth (5th) 28 Aug 2008 Annual General Meeting Announcement of Unaudited 27 Feb 2009 Third (3rd) Quarter results for the Announcement of Unaudited period ended 31 December 2008 27 Nov 2008 Second (2nd) Quarter results for the period ended 30 September Announcement of Unaudited 29 May 2009 2008 and declaration of an interim Fourth (4th) Quarter results for the dividend of 5 sen per share (less period ended 31 March 2009 25% tax) for the financial year ended 31 March 2009 Announcement of Audited 30 Jul 2009 accounts for the financial year Date of Entitlement to the interim ended 31 March 2009 15 Dec 2008 dividend of 5 sen per share (less 25% tax) for the financial year Notice of Sixth (6th) 30 Jul 2009 ended 31 March 2009 Annual General Meeting
21 August 2009 Sixth (6th) Annual General Meeting
10 Key Financial Indicators
Basic Earnings Per Share (Sen) Net Assets Per Share (RM)
10.7 10.7
9.9
9.5 80.6 9.3
33.6 8.5
(54.9)
(107.3) 2005 2006 2007 2008 2009 2005 2006 2007 2008 2009
Dividend Paid (RM Million) Retained Earnings Carried Forward (RM Million)
4,916.9 4,908.7 137.3
4,476.2 4,291.7 4,153.9 54.9
27.5 20.6
2005 2006 2007 2008 2009 2005 2006 2007 2008 2009
PROTON 2009 ANNUAL REPORT 11 Summary of Financial Highlights for Five Years
Balance Sheets as at 31 March
RM’ Million 2009 2008 2007 2006 2005
NON-CURRENT ASSETS
Property, plant and equipment 2,827.1 3,150.4 3,169.5 3,302.9 3,288.9 Prepaid land lease payments - 24.1 9.9 10.0 10.1 Goodwill 29.0 29.0 29.0 29.0 29.0 Intangible assets 431.7 275.2 169.1 18.0 14.3 Associated companies 158.4 165.4 169.8 160.4 165.6 Jointly controlled entities 195.6 192.7 223.6 245.3 251.8 Investments 10.4 10.4 10.4 10.4 6.3 Deferred tax assets 5.7 - - 105.8 38.4
TOTAL NON-CURRENT ASSETS 3,657.9 3,847.2 3,781.3 3,881.8 3,804.4
CURRENT ASSETS
Inventories 1,395.1 1,100.3 1,273.6 1,389.0 967.1 Receivables 1,080.3 1,099.0 1,192.0 1,244.0 1,403.2 Current investments 15.3 20.8 73.4 212.0 201.5 Deposits, bank and cash balances 913.9 1,226.0 626.5 1,586.0 2,454.7
TOTAL CURRENT ASSETS 3,404.6 3,446.1 3,165.5 4,431.0 5,026.5
Non-current assets held for sale 36.4 - - - -
TOTAL ASSETS 7,098.9 7,293.3 6,946.8 8,312.8 8,830.9
12 Balance Sheets as at 31 March
RM’ Million 2009 2008 2007 2006 2005
EQUITY
Share capital 549.2 549.2 549.2 549.2 549.2 Other reserves 398.5 395.8 389.7 412.7 393.8 Retained earnings 4,153.9 4,476.2 4,291.7 4,908.7 4,916.9
Equity attributable to equity holders of the company 5,101.6 5,421.2 5,230.6 5,870.6 5,859.9 Minority interest - - - - 0.3
TOTAL EQUITY 5,101.6 5,421.2 5,230.6 5,870.6 5,860.2
NON-CURRENT LIABILITIES
Long term liabilities 101.5 230.5 181.6 100.3 759.6 Deferred tax liabilities 12.2 2.4 0.8 0.8 1.1
TOTAL NON-CURRENT LIABILITIES 113.7 232.9 182.4 101.1 760.7
CURRENT LIABILITIES
Payables 1,571.3 1,524.0 1,367.2 1,519.4 1,979.5 Taxation 6.3 1.6 2.2 16.9 2.6 Short term borrowings 306.0 113.6 164.4 804.8 227.9
TOTAL CURRENT LIABILITIES 1,883.6 1,639.2 1,533.8 2,341.1 2,210.0
TOTAL LIABILITIES 1,997.3 1,872.1 1,716.2 2,442.2 2,970.7
TOTAL EQUITY AND LIABILITIES 7,098.9 7,293.3 6,946.8 8,312.8 8,830.9
PROTON 2009 ANNUAL REPORT 13 Summary of Financial Highlights for Five Years
Income Statements as at 31 March 2009
RM’ Million 2009 2008 2007 2006 2005
Revenue 6,486.6 5,621.6 4,687.3 7,796.9 8,483.3 (Loss)/Profit before taxation (319.2) 144.3 (618.1) 18.0 399.3 (Loss)/Profit after taxation (301.8) 184.6 (589.5) 46.7 442.4 Retained earnings attributable to shareholders 4,174.5 4,476.2 4,319.2 4,963.6 5,054.2 Dividend (20.6) - (27.5) (54.9) (137.3) Retained earnings carried forward 4,153.9 4,476.2 4,291.7 4,908.7 4,916.9
SHARE INFORMATION
Per Share
Basic (loss)/earnings (sen) (54.9) 33.6 (107.3) 8.5 80.6 Dividend paid (sen) 5.0 - 5.0 10.0 25.0 Net assets (RM) 9.3 9.9 9.5 10.7 10.7
Issued share capital (‘000) 549,213 549,213 549,213 549,213 549,213
14 PROTON 2009 ANNUAL REPORT 15 Corporate Profile
PROTON was incorporated on 7 May 1983 with three primary national policy objectives:
• To spearhead the automotive industrialisation process and manufacturing industries; • To acquire/upgrade technology and industrial skills within the automotive manufacturing industry; and • To strengthen the international competitiveness of Malaysia’s industrial capability.
PROTON commands a substantial share of the domestic market for passenger cars and over the years has made its presence in the following regions:
• ASEAN • China • Indian Subcontinent • Middle East - North Africa • United Kingdom/Western Europe • Australia • South Africa
16 PROTON 2009 ANNUAL REPORT 17 Corporate Profile
The much-awaited Exora in production.
The main business activities of the Group encompass vehicle engineering, research and development, manufacturing, distribution, sales and after-sales services. The Group is also involved in financial services and property management in supporting the main business activities.
The Group designs and produces cars for diverse consumer preferences. The current portfolio of PROTON models includes the reliable family-sedan Waja, the stylish Gen.2, the elegant Perdana V6, the versatile Arena (Jumbuck), the proven Saga range, the fun-to-drive Savvy, the desirable sporty Satria Neo, the ‘2008 Best Model of the Year’ winner, the Persona, and Malaysia’s first home-grown MPV, the Exora. The Group also has in its portfolio, the world- renowned Lotus sports cars, with models such as Elise, Esprit, Exige, Europa and the latest being the Evora to suit a range of customer demands and preferences.
18 Corporate Profile
The Group conducts research in its centres in Malaysia and the United Kingdom on new technologies to create cars that are unique in both design and driving performance. Through Lotus, the Group provides comprehensive and versatile consultancy services to many of the world’s OEMs and Tier 1 suppliers.
Currently, the Group has approximately 11,500 employees who are involved in the whole value chain of the business, from research, design, development, testing, stamping, casting, machining and assembly to marketing, distribution, after-sales services as well as corporate services.
Strong customer orientation and competitively priced products are the foundation of our business and essential to our success. We aim to maintain market leadership by continuing to develop innovative products and satisfy our customers’ needs better and enhance profitability.
The Lotus Exige.
PROTON 2009 ANNUAL REPORT 19
Awards and Recognition
PROTON received the following awards from various organisations as testimony of the Group’s efforts in leading the Malaysian automotive industry and making in-roads in branding and motorsports.
Awards 2009 • Asian Auto - VCA Auto Industry Awards 2008 • Frost & Sullivan Asia Pacific Automotive Awards - Best Comeback Brand Award for PROTON. - Best Model of the Year (Malaysia) 2009 for Proton • China Press’ 2008 Chinese New Year Greeting Saga. Advertisement Award, Full Colour Category. • Reader’s Digest Trusted Brand 2009 Gold Award • Frost & Sullivan’s 2008 Asean Automotive Awards for Car Category. - 2008 Best Model of the Year Award for the • Asian Auto - VCA Auto Industry Awards 2009 Persona. - Best Local Assembly MPV for Exora. • Frost & Sullivan Malaysian Manufacturing • Asian Auto - VCA Auto Industry Awards 2009 Excellence Awards 2008 - Silver Certificate of Merit - Best Local Assembly Sports Car for Satria Neo for Shah Alam Plant. CPS. • Frost & Sullivan Asia Pacific Automotive Awards - Best Model Of The Year (Malaysia) 2008 for Awards 2008 Proton Persona. • Reader’s Digest Trusted Brand 2008 Gold Award for • Frost & Sullivan Malaysian Manufacturing Car Category. Excellence Awards 2008 - Gold Certificate of Merit • Asian Auto - VCA Auto Industry Awards 2008 for Tanjung Malim Plant. - Best People’s Car Award for PROTON Saga.
20
Awards 2007 Awards 2003 • Reader’s Digest Trusted Brand 2007 Gold Award • Industry Excellence Award 2003, Quality for Car Category. Management Category III. • The Malay Mail declared the PROTON Satria Neo, • Industry Excellence Award 2003. winner of the Coolest Car of 2006. • Best Landscape Competition (First Place - Factory Category). Awards 2006 • Reader’s Digest Trusted Brand 2006 Gold Award Awards 2002 for Car Category. • Best Landscape Competition (Second Place - • Nanyang Siang Pau’s 2006 Chinese New Year Factory Category). Greeting Advertisement Award - Full Colour • Appreciation Award for Contribution to the Category - 5th Runner Up. Development of Malaysian Motorsports for 2002. • KPMG/The Edge Shareholder Value Award 2002 Awards 2005 Sectoral Winner - Industrial Market. The award • Reader’s Digest Super Brand 2005 Gold Award measured economic profit as a percentage of for Car Category. invested capital. • Merdeka Millennium Endurance Race 2005 • Highest Increase in Turnover Award among - 1st place-Overall and Class ‘O’ Winner. companies listed on the then Kuala Lumpur Stock • Malaysian Rally Championship 2005 - Overall Class Exchange (now Bursa Malaysia Securities Berhad) Winner P10 Category. for financial year 2002-2003. • Motor Vehicles and Transport Equipment Sector Awards 2004 Leader Award among the top 1,000 Malaysian • Malaysia’s Best Brand Award. companies. • National Creativity & Innovation Award 2004. • Highest Increase in Net Profit Award among • PROTON Waja - 4.5 star out of 5 star rating for companies listed on the then Kuala Lumpur being the Most Economical and Greenest Sedan Stock Exchange for financial year 2002-2003. in Australia.
PROTON 2009 ANNUAL REPORT 21 Corporate Information
Board of Directors Date of Appointment
Dato’ Mohd Nadzmi Bin Mohd Salleh 1 January 2009 Chairman/Non-Independent Non-Executive Director
Dato’ Haji Syed Zainal Abidin B Syed Mohamed Tahir 1 January 2006 Managing Director
Tuan Haji Abdul Jabbar Bin Abdul Majid 12 April 2004 Independent Non-Executive Director
Tuan Haji Abdul Kadir Bin Md Kassim 10 March 2005 Independent Non-Executive Director
Dato’ Michael Lim Heen Peok 15 September 2006 Independent Non-Executive Director
Datuk Zalekha Binti Hassan 11 February 2008 Non-Independent Non-Executive Director
Encik Oh Kim Sun 13 May 2009 Independent Non-Executive Director
Dato’ Mohammed Azlan Bin Hashim 17 December 2004 Chairman/Non-Independent Non-Executive Director (Resigned w.e.f. 1 January 2009)
22 Board Executive Committee (“Exco”) Auditors • Dato’ Mohd Nadzmi Bin Mohd Salleh – Chairman PricewaterhouseCoopers (Appointed w.e.f. 1 January 2009) (Chartered Accountants) • Dato’ Syed Zainal Abidin B Syed Mohamed Tahir Level 10, 1 Sentral, Jalan Travers Date of Appointment • Dato’ Michael Lim Heen Peok Kuala Lumpur Sentral, PO Box 10192 • Ms Vimala Menon 50706 Kuala Lumpur, Malaysia • Dato’ Mohammed Azlan Bin Hashim Tel : 03 - 2173 1188 (Resigned w.e.f 1 January 2009) Fax : 03 - 2173 1288
Board Audit Committee Registered Office • Encik Oh Kim Sun – Chairman PROTON Centre of Excellence (Appointed w.e.f. 1 June 2009) • Tuan Haji Abdul Jabbar Bin Abdul Majid KM 33.8, Westbound Shah Alam Expressway (Re-designated from Chairman to Member 47600 Subang Jaya, Selangor Darul Ehsan on 1 June 2009) Tel : 03 - 8026 9741 • Tuan Haji Abdul Kadir Bin Md Kassim Fax : 03 - 8026 9744 • Dato’ Michael Lim Heen Peok Registrar Board Risk Management Committee Tenaga Koperat Sdn Bhd • Tuan Haji Abdul Kadir Bin Md Kassim – Chairman Level 17, The Gardens, North Tower, Midvalley City • Datuk Tan Kim Leong Lingkaran Syed Putra, 59200 Kuala Lumpur • Dato’ Zainuddin Bin Che Din Tel : 03 - 2264 3883 (Appointed w.e.f. 1 October 2008) Fax : 03 - 2282 1886
Board Nomination & Stock Exchange Listing Remuneration Committee Main Board of Bursa Malaysia Securities Berhad • Dato’ Mohd Nadzmi Bin Mohd Salleh – Chairman (Appointed w.e.f. 1 January 2009) Company Secretary • Encik Ahmad Tajuddin Bin Abdul Carrim Encik Mohd Nizamuddin Bin Mokhtar (LS 006128) • Encik Md Ali Bin Md Dewal • Dato’ Michael Lim Heen Peok Investor Relations • Dato’ Mohammed Azlan Bin Hashim Encik Kelvin Low (Resigned w.e.f. 1 January 2009)
Board Disciplinary Committee • Dato’ Mohd Nadzmi Bin Mohd Salleh – Chairman (Appointed w.e.f. 1 January 2009) • Tuan Haji Abdul Kadir Bin Md Kassim • Tuan Haji Abdul Jabbar Bin Abdul Majid • Tuan Haji Yusof Bin Ahmad • Dato’ Mohammed Azlan Bin Hashim (Resigned w.e.f. 1 January 2009)
PROTON 2009 ANNUAL REPORT 23 Group Operations
PROTON Holdings Berhad
Engineering Services Manufacturing Lotus Advance Technologies Sdn Bhd (100%) Proton Tanjung Malim Sdn Bhd (100%) Proton Engineering Research Technology Perusahaan Otomobil Nasional Sdn Bhd (100%) Sdn Bhd (100%) Proton Automobiles China Ltd (BVI) (100%) Lotus Group International Limited (100%) Goldstar Proton Automobiles Co Ltd (49%)* Group Lotus Plc (100%) PT Proton Cikarang Motors (Indonesia) (100%) Lotus Cars Ltd (100%) Miyazu (Malaysia) Sdn Bhd (51%) Lotus Engineering Ltd (100%) Lotus Engineering Co Ltd (Shanghai) (100%) Lotus Engineering (M) Sdn Bhd (100%) Lotus Body Engineering Ltd (100%) Lotus Lightweight Structures Holdings Limited (formerly known as Holden Lightweight Structures Limited) (100%) Lotus Lightweight Structures Limited (formerly known as Holden Aluminium Worcester Limited) (100%) Lotus Motorsport Ltd (100%) Lotus Holdings Inc (USA) (100%) Lotus Engineering Inc (100%) Lotus Cars USA Inc (100%)
*Note: Refer to Note 43(c) to the Financial Statements
24 Sales & Distribution Investee & Associate Companies Proton Marketing Sdn Bhd (100%) Exedy (Malaysia) Sdn Bhd (45%) Proton Edar Sdn Bhd (100%) Netstar Advanced Systems Sdn Bhd (40%) Proton Cars (UK) Ltd (100%) PHN Industry Sdn Bhd (35%) Proton Cars Australia Pty Limited (100%) Marutech Elastomer Industries Sdn Bhd (25%) Proton Motors (Thailand) Limited (100%) Vina Star Motors Corporation (Vietnam) (25%) Proton Singapore Pte Ltd (100%) Aluminium Alloy Industries Sdn Bhd (19%) Proton Parts Centre Sdn Bhd (55%) Technomeiji Rubber Sdn Bhd (15%) PT Proton Edar Indonesia (95%) Peps-JV Sdn Bhd (10.50%) Ara Borgstena Sdn Bhd (6.67%)
Property Others Proton Hartanah Sdn Bhd (100%) Yayasan Proton Proton Properties Sdn Bhd (100%) Lotus Pension Trustees Ltd Proton City Development Corporation Lotus Cars Foundation Sdn Bhd (40%)
Financial Services Proton Commerce Sdn Bhd (50%) Lotus Finance Ltd (49.9%) Proton Finance Ltd (49.99%)
PROTON 2009 ANNUAL REPORT 25 Board of Directors
Encik Oh Kim Sun Datuk Zalekha Dato’ Mohd Nadzmi Binti Hassan Bin Mohd Salleh
26 Dato’ Haji Syed Zainal Abidin Dato’ Michael Tuan Haji Abdul Tuan Haji Abdul B Syed Mohamed Tahir Lim Heen Peok Jabbar Bin Abdul Majid Kadir Bin Md Kassim
PROTON 2009 ANNUAL REPORT 27 Profile of Directors
Dato’ Mohd Nadzmi Bin Mohd Salleh Chairman/Non-Independent Non-Executive Director Aged 55, Malaysian
Dato’ Mohd Nadzmi Bin Mohd Salleh was appointed Chairman of PROTON on 1 January 2009. He is also the Chairman of various subsidiaries and Board Committees within the PROTON Group of Companies.
Dato’ Mohd Nadzmi, who graduated with a Bachelor of Arts in Economics from Ohio University, United States of America (“USA”), also holds a Bachelor of Science in Chemistry and Mathematics from Ohio University and a Master of Arts in Economics and Statistics from Miami University, USA.
Dato’ Mohd Nadzmi began his career as a lecturer in the Faculty of Economic Resources and Agriculture in Universiti Pertanian Malaysia. Thereafter he held various executive positions in Petroleum Nasional Berhad and Heavy Industries Corporation Malaysia Berhad. He then left to join Edaran Otomobil Nasional Berhad as Manager in the Marketing Services Department in 1984, and later assumed the positions of Executive Director and Chief Executive Officer. In 1993 Dato’ Mohd Nadzmi was appointed Managing Director of Perusahaan Otomobil Nasional Berhad, a post he held until 1996.
Dato’ Mohd Nadzmi is also currently the Executive Chairman of Nadicorp Holdings Sdn Bhd, Express Rail Link Sdn Bhd, Trisilco Folec Sdn Bhd, and Chairman of J.T. International Berhad. He sits on the Boards of Ranhill Utilities Berhad, J.T. International Berhad, V.S. Industry Berhad, Konsortium Transnasional Berhad, Transocean Holdings Bhd and several private limited companies.
Dato’ Mohd Nadzmi has attended all Board Meetings held since his appointment during the Financial Year. He has no conflict of interest with the Company and does not have any family relationships with any director and/or major shareholder of the Company. He has had no conviction for any offences within the past ten (10) years.
28 PROTON 2009 ANNUAL REPORT 29 Profile of Directors
Dato’ Haji Syed Zainal Abidin B Syed Mohamed Tahir Managing Director Aged 47, Malaysian
Dato’ Haji Syed Zainal Abidin B Syed Mohamed Tahir was appointed Managing Director of PROTON on 1 January 2006. He also sits on the Boards of various subsidiaries within the PROTON Group of companies.
Dato’ Haji Syed Zainal Abidin, who graduated with a Bachelor of Science in Engineering from the University of Maryland, USA, began his career as a Project Engineer with Petronas Gas Sdn Bhd in 1987, prior to joining Petroliam Nasional Berhad in 1992 as the Senior Executive of Corporate Planning & International Business Development. He then left to join HICOM Holdings Berhad in 1995, where he assumed various senior positions in the company.
Dato’ Haji Syed Zainal Abidin lent his expertise to PERODUA when he was appointed Senior General Manager in 1999. Subsequently, he was appointed Executive Director of PERODUA Auto Corporation Sdn Bhd in 2002, and later promoted to Deputy Managing Director in October 2005.
Dato’ Haji Syed Zainal Abidin has attended all Board Meetings with the exception of one (1) meeting held during the Financial Year. He has no conflict of interest with the Company and has no family relationships with any director and/or major shareholder of the Company. He has had no conviction for any offences within the past ten (10) years.
30 Profile of Directors
Tuan Haji Abdul Jabbar Bin Abdul Majid Independent Non-Executive Director Aged 64, Malaysian
Tuan Haji Abdul Jabbar Bin Abdul Majid was appointed as a Director of PROTON on 12 April 2004. He is a Fellow Member of the Institute of Chartered Accountants, Australia, as well as a member of the Malaysian Institute of Accountants. He is also a member of the Executive Council of the Malaysian Institute of Certified Public Accountants “( MICPA”).
Tuan Haji Abdul Jabbar began his career in 1974 as Senior Manager in the Internal Audit and Organisation Department of Bank Pertanian Malaysia. In 1977, he joined KPMG Malaysia as Manager and was admitted to the partnership two years later. In 1993, he was promoted to Deputy Senior Partner and was made Senior Partner in 1995, a position he held until his retirement in 2000.
Tuan Haji Abdul Jabbar then joined Malaysia Derivatives Exchange Berhad in 2001 and retired as Executive Chairman on 28 February 2004. He was a past president of MICPA. He was an Adjunct Professor of the Faculty of Economics and Accounting of the International Islamic University and a member of the Senate of the Open University Malaysia Board.
He is currently a member of the Board Audit Committee of the Company. Apart from PROTON, he also sits on the Boards of Tradewinds Corporation Berhad (“Tradewinds”), Opcom Holdings Berhad and Bank Muamalat Malaysia Berhad (“Bank Muamalat”). He is Chairman of the respective Board Audit Committees of Tradewinds and Bank Muamalat.
Tuan Haji Abdul Jabbar has attended 8 out of 9 Board Meetings held during the Financial Year. He has no conflict of interest with the Company and has no family relationships with any other director and/or major shareholders of the Company. He has had no conviction for any offences within the past ten (10) years.
PROTON 2009 ANNUAL REPORT 31 Profile of Directors
Tuan Haji Abdul Kadir Bin Md Kassim Independent Non-Executive Director Aged 69, Malaysian
Tuan Haji Abdul Kadir Bin Md Kassim was appointed to the Board of PROTON Holdings Berhad on 10 March 2005. He serves as the Chairman of the Board Risk Management Committee. He is also a member of the Board Audit Committee and Board Disciplinary Committee of the Company.
Tuan Haji Abdul Kadir holds a Bachelor of Laws Degree from the University of Singapore. He served in the Malaysian Administrative and Diplomatic Service and in the Judicial and Legal Service between 1966 and 1973, holding various positions. He is currently the Managing Partner of Messrs Kadir, Andri & Partners.
Tuan Haji Abdul Kadir is a director of Petroliam Nasional Berhad (“Petronas”), UEM Group Berhad, UEM Land Holdings Berhad, Suria Capital Holdings Berhad, TIME dotCom Berhad, Sino Hua-An International Berhad, Danajamin Nasional Berhad and Cement Industries of Malaysia Berhad. He is also a Director of a few private companies.
He is Chairman of the Exchange Committee of the Labuan International Financial Exchange as well as a member of the Investment Panel of the Lembaga Tabung Haji and Corporate Debt Restructuring Committee.
Tuan Haji Abdul Kadir has attended all Board Meetings held during the Financial Year. He has no conflict of interest with the Company and has no family relationships with any director and/or major shareholders of the Company. He has had no conviction for any offences within the past ten (10) years.
32 Profile of Directors
Dato’ Michael Lim Heen Peok Independent Non-Executive Director Aged 61, Malaysian
Dato’ Michael Lim was appointed to the PROTON Board on 15 September 2006 and is a Member of the Board Executive Committee, Board Audit Committee and Board Nomination & Remuneration Committee. Dato’ Lim also sits on the Boards of various companies within the PROTON Group.
After graduating with an honours degree in Engineering from the University of Strathclyde, United Kingdom, Dato’ Lim began his career with the UMW Group in 1975 in various senior managerial positions. In 1986 Dato’ Lim was appointed the Managing Director / Chief Executive Officer of UMW Toyota Motor Sdn Bhd, a joint venture company between UMW and Toyota Motor Corporation of Japan. Dato’ Lim retired in 2004.
Currently, Dato’ Lim is the Chairman of Furniweb Industrial Products Bhd, an export oriented manufacturing company with plants in Malaysia and Vietnam.
Dato’ Lim has attended 8 out of 9 Board Meetings held during the Financial Year. He has no conflict of interest with the Company and has no family relationships with any other director and/or major shareholders of the Company. He has had no conviction for any offences within the past ten (10) years.
PROTON 2009 ANNUAL REPORT 33 Profile of Directors
Datuk Zalekha Binti Hassan Non-Independent Non-Executive Director Aged 56, Malaysian
Datuk Zalekha Binti Hassan was appointed as a Director of PROTON on 11 February 2008. She is currently the Deputy Secretary General of Operations at the Ministry of Finance.
She holds a Bachelor of Arts (Hons) from University Malaya.
Datuk Zalekha was previously with Konsortium Baja Nasional Berhad, Tenaga Nasional Berhad, Putrajaya Holdings, Multimedia Development Corporation (“MDEC”) and Penang Port Sdn Bhd.
Currently, Datuk Zalekha is a Director of Telekom Malaysia Berhad and Perbadanan Kemajuan Negeri Selangor (“PKNS”).
Datuk Zalekha has attended 6 out of 9 Board Meetings held during the Financial Year. She has no conflict of interest with the Company and has no family relationships with any other director and/or major shareholders of the Company. She has had no conviction for any offences within the past ten (10) years.
34 Profile of Directors
Encik Oh Kim Sun
Independent Non-Executive Director Aged 61, Malaysian
Encik Oh Kim Sun was appointed to the Board of PROTON Holdings Berhad on 13 May 2009 and Chairman of the Board Audit Committee on 1 June 2009.
Encik Oh is a qualified accountant and member of the Malaysian Institute of Certified Public Accountants (“MICPA”). He began his career with Coopers & Lybrand in London and subsequently moved up the corporate ladder, assuming positions such as Finance Director of Taiko Plantations Sdn Bhd, Financial Controller of ICI Malaysia and Finance Manager (Secondment) of ICI’s Headquarters in London, overseeing Northern Europe. In 1994, he led the successful management buyout of ICI’s Malaysian operations and was appointed Group Executive Director of Chemical Company of Malaysia Berhad until 2003.
Currently Encik Oh serves on the Board of Directors of several public companies namely, UEM Land Holdings Berhad (“UEM Land”), Pharmaniaga Berhad (“Pharmaniaga”), Faber Group Berhad (“Faber”) and Nikko Electronics Berhad (“Nikko”). He is also a Director of IMPAX Laboratories Inc (“IMPAX”), a company listed on National Association of Securities Dealers Automated Quotations (“NASDAQ”).
He is the Chairman of the Audit Committees of UEM Land, Faber and Pharmaniaga as well as a member of the Audit Committees of Nikko and IMPAX. In addition, he is the Chairman of the Nomination and Option Committee of Nikko and serves on the Nomination and Remuneration Committee of UEM Land as well as the Investment Committee of Pharmaniaga.
Encik Oh has no conflict of interest with the Company and has no family relationships with any other director and/ or major shareholders of the Company. He has had no conviction for any offences within the past ten (10) years.
PROTON 2009 ANNUAL REPORT 35 PROTON Group Management Committee Members
Sitting (left to right) 01 Hasnah Binti Ismail 02 Dato’ Haji Syed Zainal Abidin 03 Michele Kythe Lim Beng Sze Director, B Syed Mohamed Tahir General Manager, Group Human Resource Division Managing Director Group Legal Division
Standing (left to right) 04 Tajul Zahari Bin Abu Bakar 05 Claudius Meynert 06 Mohamad Shukor Bin Ibrahim Director, Engineering Division Director, Export Markets Division Chief Executive Officer, Proton Edar Sdn Bhd
36 05 07 04 06 08 09 10
01 02 03
07 Dr Wolfgang Karl Epple 08 Vimala Menon 09 Mohd Nizamuddin Bin Mokhtar Director, Group Quality Division Director, Finance & Corporate General Manager, Group Secretarial Affairs Division & Compliance Division
10 Razif Bin Ahmad Director, Group Procurement Division
PROTON 2009 ANNUAL REPORT 37 Other Senior Officers
01 Muhammad Aris Bin Anuar General Manager, Manufacturing
02 Zahari Bin Husin General Manager, Product Marketing
03 Hazrin Fazail Bin Haroon General Manager, Product Planning 01 02 03 04 Datuk Abdul Razak Bin K P Dawood Sultan General Manager, Group After Sales
05 Peter Anthony Das General Manager, Marketing & Branding
04 05
Heads of International Subsidiaries
10 Michael J Kimberley Chief Executive Officer, Group Lotus Plc
11 Brian Collier Managing Director, Proton Cars (UK) Ltd
12 John Startari Managing Director, Proton Cars Australia 10 11 12 Pty Limited
38 06 Dr Badrulhisham Bin Mohd Ghazali Senior Manager, Corporate Planning
07 Muhammad Amyzaddin Bin Raya Senior Manager, Group Corporate Communications
08 Low Pheng 06 07 General Manager, Group Internal Audit
09 Mohd Amin Bin Putih Senior Manager, Group Risk Management
08 09
13 Moses Tan Managing Director, Proton Singapore Pte Ltd
14 Ricky Too Heng Keong President Director, PT Proton Edar Indonesia
13 14
PROTON 2009 ANNUAL REPORT 39 Steering Ahead Steering Ahead The Company navigates through challenges and builds on strengths to scale new heights in PROTON’s quest to become a world class company.
Innovation in Motion Chairman’s Statement
As the new Chairman of the Company and on behalf of the Board of Directors, I am pleased to present the Annual Report and Audited Financial Statements of the PROTON Group for the Financial Year ended March 31, 2009.
Industry Overview
The year under review witnessed a tremendous improvement in motor vehicle sales in the first six months from April 2008 to September 2008. This uptrend, which began from the second half of 2007, was a welcome relief to the industry but unfortunately the momentum could not be maintained. After recording peaks of more than 50,000 sales in April, July and September 2008, the Total Industry Volume (TIV) saw a significant drop of 21% in the second half of our fiscal year. From October 2008 until March 2009, monthly TIV struggled to breach the 40,000 mark due to the global economic meltdown marked by the collapse of major financial institutions in the United States. This was further compounded by the increase in petrol prices which reached its apex in October 2008 followed by the customary slow months of November and December.
Despite the lagging industry sales in the second half of the year under review, the Malaysian Automobile Association’s (MAA) cautiously optimistic forecast of 510,000 for 2008 was decisively and pleasantly surpassed by a 7% margin when the TIV breached the 500,000 mark only for the second time when it recorded its second highest number in history of 548,115.
In terms of segmentation, the performance of passenger car sales was simply record-breaking. MAA’s careful projection of 463,000 units was convincingly exceeded when the passenger car TIV registered sales of 497,459; the highest number achieved ever, an improvement of more than 12% compared to 2007, driven mainly by the positive consumer sentiments during the first nine months of 2008.
Primary factors that contributed to the resurgence of the industry included the introduction of new models at highly competitive and consumer-friendly prices; attractive and creative financing schemes for car buyers as a result of aggressive sales campaigns; and a strong economic growth of 5.75% in 2008.
42 Dato’ Mohd Nadzmi Bin Mohd Salleh Chairman/Non-Independent Non-Executive Director
PROTON 2009 ANNUAL REPORT 43 Chairman’s Statement
Moving forward, MAA has forecasted a decrease in TIV to 480,000 for 2009 or a 12.4% decline, with passenger car TIV also estimated to shrink to 436,800 or a drop of 12.2% over 2008. Although cautious, the forecast is well founded on the current global financial and economic climate, reiterated by the contraction of GDP growth. Other factors that might negatively impact car sales are the drastically fluctuating oil and commodity prices as well as unfavourable FOREX rates.
Be that as it may, we are grateful for the Government’s recent announcement in March 2009 recognising the automotive sector as being among the major industries with potential for further development, in light of its contribution to the growth of the nation. As part of the Second Stimulus Package, the Government was cognisant of the less than encouraging sales performance in the automotive industry, particularly in the second half of the year under review, with many companies in the automotive eco-system facing difficulties. In view of this, the Government generously allocated an additional RM200 million to the Automotive Development Fund to continue supporting the development of the automotive industry, in particular the vendor community, as well as to establish the Automotive Institute of Malaysia.
PROTON at Hari Peneroka, Felda Maokil.
To further underline its commitment to the sustainability of the industry, the Government, in a joint effort with the private sector, agreed to assist with the auto-scrapping scheme for PROTON and PERODUA. Under the scheme, a discount of RM5,000 will be given to car owners who trade in their cars of any make which are at least 10 years old for the purchase of new cars. The Government will finance part of the discount borne by PROTON or PERODUA. This scheme is intended to stimulate car sales as well as increase the safety and roadworthiness of the vehicles currently on the road, whilst reducing carbon emissions.
Additionally, PROTON remained true to its philosophy of producing the right car at the right time, price and market, in our aspiration to become a regionally competitive automotive
44 Chairman’s Statement
company by creating value and earning customers’ trust through the quality and innovation of our products and people.
We are aware that there is an increasing demand for compact vehicles which are competitively priced, economical, efficient and safe and on this premise, PROTON will continue to be creative and innovative in our sales and marketing strategies while offering products that cater to the needs of today’s consumers.
Financial Performance
The markedly improved market condition during the first half of the year under review saw an improvement in terms of sales and revenue for PROTON. With sales increase of 9%, our revenue was positively impacted with an increase of 15% compared to 2008.
Nevertheless, we are mindful of the challenges to be faced in the next financial year and beyond. The gloomier second half of the year under review was a reflection and clear indication of the foreseeable future, which will be tough in light of the financial crisis which is greatly impacting the global automotive industry.
In light of this, our immediate and prime concern is to reinforce PROTON’s foundation and strengthen its balance sheet in order to confidently strive forward and overcome obstacles in order to focus on and aggressively enhance our export programme.
Accordingly, for the financial year ended 31 March 2009, PROTON recorded a loss after tax of RM301.8 million albeit on the back of improved revenue of RM6.5 billion. This decline was largely due to the one-off exceptional provision for the impairment of property, plant and equipment and inventory write-down for certain models impacted by declining demand. Additionally, PROTON’s financial performance for the second half of the financial year was also adversely affected by the accelerated amortisation of dies and jigs for certain models as well as higher commodity prices, increased costs of components and raw materials which arose from higher foreign currency exchange rates, particularly, the Japanese Yen and the US Dollar, coupled with allowance for doubtful debts.
On a more positive note, the Group’s cash and cash equivalents as at 31 March 2009 was maintained close to the RM1 billion mark. This was after taking into account the various research and development (R&D) expenditure undertaken during the financial year to develop its recently launched first home grown multi-purpose vehicle, the Exora; initiatives
PROTON 2009 ANNUAL REPORT 45 Chairman’s Statement
to take our successful Saga and Persona models into international markets; launch of product refreshers, namely the Persona SE and Satria Neo CPS; and commitment for powertrain development, further product refreshers, as well as new product introduction.
In addition, PROTON has received an R&D grant from the Government amounting to RM81 million, under the National Automotive Policy (NAP), in recognition of the Group’s investment in R&D amounting to RM162 million.
Dividends
An interim dividend of 5 sen (less income tax) was declared on 27 November 2008 when PROTON announced the financial results for the second quarter ended 30 September 2008. The said dividend was paid to shareholders on 14 January 2009.
In view of the need to ensure that PROTON is viably strengthened and able to achieve long- term and sustainable growth, the Board of Directors is not recommending the declaration of any further dividends for the financial year ended 31 March 2009. With improved profitability in the future, the Board expects to once again be able to recommend a suitable dividend payment.
46 Chairman’s Statement
Corporate Developments
PROTON has during the course of the year under review, carried out various strategic and tactical initiatives aimed at reinforcing the foundation for future growth.
Expanding Product Range Within the PROTON Group, Lotus Group International Limited (“Lotus”) unveiled the much-awaited Evora at the London Motor Show. Working on the concept of “The Practical Lotus Sportscar”, the Evora is the world’s only 2+2 mid-engined vehicle, powered by a 3.5 litre V6 engine. With almost 300 deposits received prior to the price announcement and having received rave reviews from international motoring media, the Evora is well-placed to establish itself as the standard or benchmark in its car segment. To date, the Evora is in full production and expected to contribute positively to Lotus’ bottom-line in the near future. The Evora.
A noteworthy mention is the involvement of a team of Malaysian engineers in key areas of the Evora project. Their participation not only brought an added dimension to the development of the Exora but further propagated knowledge sharing, thereby creating invaluable synergies within the Group. Invariably, the close working relationship between our Malaysian engineers and their Lotus counterparts will be a significant factor in creating ever-more competitive and appealing PROTON vehicles, moving forward.
On this score, the Exora is already blazing new trails for PROTON since its official launch in April 2009. Being Malaysia’s very first MPV and PROTON’s latest addition to its stable, the Exora is proudly carrying our flag with its well thought out design, good built quality and robust safety features. To date, the Exora has surpassed even the most demanding market
PROTON 2009 ANNUAL REPORT 47 Chairman’s Statement
expectations. In terms of quality, the Exora is PROTON’s first model to breach the 80% CFC (Concern Free Car) level, continuing the uptrend which started with the Persona (at 31.8% CFC level) and was conclusively surpassed by the Saga, which recorded a staggering CFC level of 77.8%.
I believe the success of the Exora will contribute positively to the Group’s bottom-line in the near future, and to sustain long-term growth, we will continue to take the next leap forward in terms of creativity, innovation and quality when it comes to introducing new products, both in the local and international markets.
The Exora launch was officiated by the Prime Minister YAB Dato’ Sri Mohd Najib Bin Tun Abdul Razak in the presence of PROTON Adviser YABhg Tun Dr Mahathir Mohamad.
48 Chairman’s Statement
Developing New Products To surmount a challenging industry and to appeal to an ever-discerning marketplace, PROTON must continue to produce exciting, market-centric, value-for-money products to win over the hearts of the consumers. In this respect, PROTON has embarked on various programmes to enhance its product line-up, with refreshers for the Saga, Persona, Waja and Gen.2 planned for the next financial year. Further ahead, plans are in place for the Waja and Perdana replacement models targeted to revitalise the hugely successful but aging models.
To underline PROTON’s global competitiveness and to reaffirm our global reach, we have also embarked on a global small car programme which is crucial in our efforts to establish PROTON in the overseas market. Conceptually, this vehicle will be a competitively priced, small and trendy hatch, with a small capacity engine that meets all emission standards.
At the same time, PROTON is also mindful that it has to enhance its powertrain to suit the needs of today’s regulatory requirements and the demands of a growing environmentally- friendly and cost-conscious customer base. To this end, PROTON, together with Lotus, kicked off the aptly named Phoenix Project to ensure that our powertrain offerings will satisfy these needs and perfectly complement our cars.
Expanding Exports PROTON continued to forge ahead in our quest to expand our reach and product offerings in key export markets during the year under review. To do otherwise would be detrimental to the Group given that our long-term success hinges on the brand’s ability to sell more cars well beyond the boundaries of our local market.
We are well aware that the operating landscape for the passenger car industry globally will invariably be impacted by the global economic crisis. Fortunately, our export strategy over the past few years has been to focus on high-growth markets regionally and selected emerging markets, namely ASEAN, China, India, and the Middle East–North Africa; many of which are markets that have been relatively resilient from the fallout of the economic crisis.
PROTON 2009 ANNUAL REPORT 49 Chairman’s Statement
In line with this export strategy, our locally-acclaimed Persona was successfully launched in Brunei, Australia, Indonesia, Saudi Arabia, Egypt and Syria during the fiscal year. The response in these markets has been and continues to be encouraging, to say the least. This positive support can be attributed to the growing recognition of the PROTON brand in these countries, the stylish and high-value attributes of the Persona, as well as excellent distribution and customer support.
Minister of International Trade and Industry, YB Dato’ Mustapa Bin Mohamed visits PROTON.
Strategic Initiatives Moving Forward
Collaborations In furtherance of the Asian Multi-Local OEM (AMLO) strategy, PROTON collaborated with Saipa Co. of Iran to explore the possibility of joining forces in the areas of engine manufacturing, model development and R&D. The agreement will pave the way for PROTON to further develop its technology export initiatives, specifically for the Iran-Middle East markets.
Still on Iran, which is one of the largest car markets in that region, PROTON has also signed an agreement with Zagross Khodro (Zagross) for the supply of automotive parts to the latter, our sole distributor in Iran. This is the third in a series of agreements, following the licensing, technical assistance and equipment purchase agreements, which allows Zagross to assemble the Gen.2 through a completely-knocked-down (CKD) arrangement. The first production of the model commenced in April 2009 at Zagross’ assembly plant in Borujerd city, southwest of Iran.
50 Chairman’s Statement
In China, PROTON has shipped more than 4,000 completely built-up Gen.2 units to Youngman. After the initial trial run in December 2008, the CKD supply and operations has commenced, opening a new chapter for PROTON in China.
With Mitsubishi Motors Corporation (MMC) of Japan, PROTON entered into a product collaboration arrangement for the development of a new vehicle, which is targeted to hit the streets sometime in the near future. We certainly hope that this rekindled relationship with MMC will be mutually beneficial and at the same time accelerate PROTON’s product and quality programmes.
PROTON Edar Sdn Bhd and Edaran Otomobil Nasional Berhad inked a new Master Dealer Agreement in May 2009.
Innovation in Motion PROTON is aware that change, driven by technological advancement, environmental awareness, increasing fuel prices, fuel shortages and ultimately consumer needs and demands, is coming. Zero emission vehicles, as opposed to vehicles based on the internal combustion engine, conventional or otherwise, may soon be the order of the day. As more and more companies are scrapping their hydrogen programme, a pure electric vehicle or PEV seems to be the only viable alternative to achieve zero emission.
Environmentally, it releases almost no air pollutants and there is less noise pollution than a vehicle powered by an internal combustion engine and potentially, with the proper infrastructure, it can be very inexpensive to run and maintain.
PROTON 2009 ANNUAL REPORT 51 Chairman’s Statement
For small global players like PROTON, this is a window of opportunity for us to close the gap on the global giants, as no one has the clear advantage. OEMs with heavy investment in conventional internal combustion engines see the electric technology as a threat, whereas small players can seize this opportunity to catapult into the global arena. In view of this, PROTON has taken the first step by entering into a strategic relationship with Hong Kong- based Detroit Electric Holdings Ltd for the licensing and provision of our products and manufacturing services with the objective of mass producing PEVs for the United States and European Union markets.
PROTON entered into a strategic partnership with Detroit Electric to manufacture pure electric vehicles.
Prospects
As we enter 2009, the global automotive industry is facing one of its stiffest challenges ever in history. The denominators for most of the OEMs in the world today are declining sales, tighter credit, increased global competition, higher cost of raw materials, and until recently, rising petrol prices, and growing consumer demand for more fuel-efficient vehicles are driving a transformation of the industry across its entire value chain.
52 Chairman’s Statement
The Detroit 3 (General Motors, Ford and Crysler) is in trouble and due to its intimate symbiotic relationship with the global automotive industry, there is no question that the automotive industry, is in turmoil. Their struggles will impact the OEMs around the world and as the financial crisis worsens, impacting OEMs, dealers and consumers, we will see a decline in consumer demand. Unlike previous years, when slow growth in the United States, Western Europe and Japan was offset by increased growth in the emerging markets of Russia, China, Eastern Europe and India, the global financial instability may result in declining sales in these emerging markets as well. And with declining sales, the entire eco- system will be impaired.
Thus, cash conservation and generation is imperative for PROTON and all players in the industry. We have to be vigilant and put cost-cutting measures in place. Additionally, initiatives that increase efficiency and disposal or shuttering of non-core assets and operations must be promoted and executed.
Fuel efficiency will be the new buzz; small will be big and big will be small. As mentioned earlier, alternative fuel and green technology cannot be sidelined. Although a PEV will take some time in getting to the market and achieving commercial viability, in-roads have already been made. As more and more OEMs, traditional or otherwise, embrace the PEV, the desired scale could be achieved to meet the desired end commercially, and more importantly, environmentally. The secret to success is in the battery technology. The more it can store, the faster it charges, the more exciting the business model will become.
Impaired by the credit crunch, we will see more creative and innovative collaborations between OEMs such as joint developments of platforms and powertrains or component sharing or capacity utilisation. Smart partnerships based on an asset light approach as propounded by our AMLO strategy are appropriate in the current economic situation.
In short, there will be tough times ahead for the industry and for PROTON. However, with green shoots of an economic recovery emerging and the Government’s stimulus package coming on stream, coupled with a revival in consumer confidence in the PROTON brand driven by aggressive quality initiatives, as well as by placing ourselves on a firmer financial footing with the one-off exceptional provision made for the year under review, we are confident that PROTON will be able to weather this economic storm. We aim to do this by maintaining our focus on establishing ourselves as a truly global OEM in terms of sales, profitability, products, services, quality and capabilities.
PROTON 2009 ANNUAL REPORT 53 Chairman’s Statement
The Exora is a testament of PROTON’s continued commitment to excellence. With the expansion of our product portfolio beyond our traditional passenger car segment, the Exora, together with the Persona and Saga, are expected to be significant contributors to PROTON’s growth.
The Prize Presentation for the MPV Naming Contest. Acknowledgement
We are at the cusp of a potentially dramatic change in the global automotive industry. With the Detroit companies facing a bleak future and other global automotive giants facing an unprecedented state of affairs, PROTON’s future, albeit testing, remains firmly in our hands. Responding to the difficult 2006/07 financial year with five consecutive profitable quarters and then to be faced with the current global economic meltdown, is discouraging and exigent. But at the core of PROTON we have people – our greatest assets – without whom our past would be unremarkable and our future unsustainable.
For that reason alone, on behalf of the Board of Directors, I wish to convey our sincerest of appreciation to members of the PROTON family at all levels and across various functions and countries and to our extended PROTON family – our sales/service dealers and vendors; as well as our business partners domestically and internationally, for your perseverance and dedication throughout the challenges of the last few years. I am certain that we will continue as one to ensure our sustainability, relevancy and rightful place in history.
On behalf of PROTON and its Board of Directors, I would also like to extend our thanks and appreciation to my predecessor, YBhg Dato’ Mohammed Azlan Bin Hashim, for his invaluable leadership and guidance during his years of service to the Group.
54 Chairman’s Statement
Flagging off the convoy in conjunction with Malaysia’s participation in the Singapore Open Super Series this year, with Badminton Association of Malaysia.
At the same time, my sincerest appreciation goes out to our Board of Directors for its vision and commitment to guide PROTON in achieving our strategic objectives. We are also grateful for the support shown by our shareholders and confident that we will continue to strive ahead to enhance shareholder value in the long term.
Our appreciation and gratitude also goes out to all our customers around the globe, as without your support, feedback, comments and criticisms, PROTON would not have been able to achieve what it has in the relatively short period of time, in becoming a full-fledged OEM. Rest assured we will strive to become a badge that owners are proud to own.
Finally, we would like to extend our sincerest gratitude to our Prime Minister YAB Dato’ Sri Mohd Najib Bin Tun Abdul Razak; our adviser YABhg Tun Dr Mahathir Mohamad; our former Prime Minister YABhg Tun Abdullah Haji Ahmad Badawi; and the Malaysian Government for their continued support and guidance of PROTON and the Malaysian automotive industry during these tumultuous times. Without this support, our progress and the growth of the industry would have been greatly stifled and impaired.
Thank you.
Dato’ Mohd Nadzmi Bin Mohd Salleh Chairman
PROTON 2009 ANNUAL REPORT 55 Powering Growth Powering Growth Opportunities abound for PROTON to bring innovation to life through the harmonious blend of technology, engineering, and manufacturing in products of quality.
Innovation in Motion Managing Director’s Review
In reviewing the previous financial year, I am confident that PROTON remains well on-track to achieve its aim of becoming a world-class car manufacturer. This confidence stems from the fact that the Group has again proven its ability to design and manufacture products from start to finish that are well received by the market.
Furthermore, we have made tangible progress in the area of quality, which is vital to the brand’s long-term growth and consumer acceptance. This was supported by a focused approach to drive greater cost efficiencies throughout our value chain while strengthening our vendor base and distribution network in an effort to enhance PROTON’s overall business eco-system.
Collectively, these measured steps are integral to pushing PROTON to greater heights of success. Given that the industry’s current operating conditions may seem daunting and challenging both internally as well as externally, we must not lose sight of what has been achieved and keep our eyes firmly on the longer-term objectives.
Whilst we have made progress, the journey still continues, and stakeholders can rest assured that the milestones achieved during the past years provide a positive indication that the future indeed looks encouraging for the Company and the brand.
Product
As a full-fledged automaker, PROTON is defined by its products. Hence, throughout the Group’s operational spectrum, we ensure that our products are conceptualised, manufactured and delivered in a way that will positively impact our customers experientially. In this respect, we have always believed that the value of the PROTON brand is in the sum of lasting impressions that we make on our customers.
58 Dato’ Haji Syed Zainal Abidin B Syed Mohamed Tahir Managing Director
PROTON 2009 ANNUAL REPORT 59 Managing Director’s Review
Thus, it is on this very basis that our nation’s first multi-purpose vehicle (MPV), the PROTON Exora, was developed. Catering to the needs of the contemporary Malaysian family, the PROTON Exora is an appealing blend of style, practical functionality, value-for-money and superior safety.
The name for PROTON’s first MPV was unveiled in February 2009 following a Naming Contest.
The highly encouraging response we have since received for the Exora todate underscores PROTON’s ability to develop winning products that will contribute positively to our bottom- line.
On the same note, our existing stable of vehicles, namely the Persona and Saga, were recognised for their winning qualities and values during the past year.
We have what it takes to develop products that appeal to customers but in order to sustain top-line growth, we must make sure that our existing product range continues to do well in the highly competitive environment of today.
60 Managing Director’s Review
With this in view, we have updated and refreshed key models during the year under review. These include a Special Edition version of the Persona, which was introduced to enthusiastic response, and a “sportier” Satria Neo that captured the imaginations of trendy Malaysians. In addition, we developed several variants for our new Saga model to cater to niche but sizeable markets.
Our acquisition of Lotus remains a valuable investment for us as we continue to further explore and utilise their engineering advancements and technologies to enhance our products and manpower skills. We have made positive progress in our technology transfer projects with Lotus, such as in vehicle driving dynamics, development of the electric vehicle, as well as powertrain and CamPro engine development.
As we move forward, PROTON will maintain its momentum to introduce new products while updating our existing range. We will continue to invest in research and development as well as extensive market surveys to ensure that we keep on delivering products that are relevant. Product development projects include the incorporation of improved new technologies into our vehicles as well as exploration of new and alternative technology such as hybrid and electric vehicles.
In summary, we aim to achieve a stable of well-proven and well-received products that will enable the brand to seize market share at home as well as abroad.
PROTON 2009 ANNUAL REPORT 61 Managing Director’s Review
Quality
Continuous quality improvement remains the mainstay for PROTON. While tangible results have been achieved over the years, as reflected in the significant reduction in customer concerns ratio for our vehicles, complacency in this area is not an option for the Group.
During the year under review, various quality improvement activities were carried out throughout the organisation. We reintroduced a Group-wide Quality Campaign to drive home the importance of quality in the hearts and minds of PROTON’s management, employees as well as business partners. Quality improvement is a comprehensive process that has to transcend all aspects of our business in order to garner results.
Additionally, we have taken significant measures to improve on customer engagement programmes, by increasing customer-focused activities and reaching out in order to acquire their views, suggestions and complaints as part of our improvement process.
The financial year under review also saw the Group making headway with our customers by enhancing the quality of our customer-relations management (CRM). Our end-users can be our brand champions if they come away with a positive experience after every single interaction with the brand, including cases where we have to address concerns or issues.
Also, in line with our aim to be more responsive to our customers, we have remained committed to our PROTON i-CARE customer service programme with the launch of the 10th Servis Mesra outlet in Damansara Jaya, Selangor, in the second half of 2008. This programme is a key platform to enable us to deliver high quality after-sales services, which is paramount to building long-term brand equity.
The focus on quality improvement was further enhanced during the Financial Year.
62 Managing Director’s Review
Cost Efficiency
Cost management has become all the more important in this challenging operating environment where lower demand has been exacerbated by the increased cost of raw materials and components.
In view of this, PROTON continued to strengthen collaborations within our product planning and development, manufacturing assembly, procurement and cost control departments to minimise wastage while maximising cost efficiencies. At the core of our cost efficiency measures is the reduction of the Bill of Materials (BOM) cost suchasin carrying out global sourcing for major material suppliers beyond Malaysia. We have been identifying opportunities to tap into the supply chain of these major suppliers to reap the benefits of lower material costs.
Apart from that we have also carried out development programmes for our existing vendors to improve and expand their manufacturing competency to include research and development capabilities. By reducing their costs of product development outsourcing, the vendors will be able to offer competitive prices of parts and materials not only to PROTON but to other major automotive players within and outside the country.
PROTON 2009 ANNUAL REPORT 63 Managing Director’s Review
For material and parts sourcing, we have started to develop benchmarking and best practices guidelines in order to stay comparatively at par in terms of our procurements with other players within the industry.
In addition, PROTON is committed to utilising a systematic decision-making process termed Value Analysis/Value Engineering or VAVE to secure raw materials and components at the greatest value, as opposed to cost, which will ultimately provide a long-term cost advantage to the Group.
Domestic Market
Operational cost efficiencies can also be derived from a strengthened distribution network. A new Master Dealership Agreement signed between our distribution arm PROTON Edar Sdn Bhd and Edaran Otomobil Nasional Berhad (EON) to rationalise the sales and services network of PROTON vehicles certainly emphasises this fact.
The rationalisation aims to effectively reduce the number of sales outlets from 282 to 191 and service outlets from 361 to 214 by end of 2009. The exercise will not only result in cost- savings but improvements in the efficiency and productivity of our dealer network eco- system. PROTON will have a unified and strengthened marketing, distribution and after-sales network, thus allowing us to compete more effectively and efficiently in the competitive marketplace of today. Ultimately we seek to improve on our customer satisfaction index (CSI) and service satisfaction index (SSI) not only in terms of ensuring better quality services but also greater efficiency in logistics arrangements.
Export
Apart from the local market, we have begun a more aggressive approach to capture export markets as defined under the Asian Multi-Local OEM (AMLO) strategy, namely, ASEAN, China, India and the Middle East-North Africa (MENA). We continue to concentrate on these high-growth regional markets for economies of scale and plan to make further in- roads into these markets by leveraging on pre-existing trade and cultural linkages with Malaysia.
64 Managing Director’s Review
During the year, we launched the Persona in Egypt, Saudi Arabia, Oman and Syria, as well as Indonesia. We also launched the Persona CNG and the Satria Neo CPS in Thailand, while we introduced the Saga in Brunei.
Launch of Persona and Gen.2 IAFM in Egypt in November 2008.
In December 2008, we concluded a series of agreements with Zagross Khodro (ZK) of Iran which will allow ZK to assemble the PROTON Gen.2 model through a completely-knocked- down (CKD) arrangement in Iran. The agreement signifies our continued commitment to the vast Iranian market as well as the overall export market.
PROTON will further strengthen export programmes particularly in ASEAN, China and the Middle East. We plan to introduce the Saga and Exora in all overseas markets in the very near future. Vendor Base
Concurrently with the rationalisation of our distribution network, PROTON also made efforts to consolidate the vendor base with the aim of bolstering cost efficiencies and quality improvements.
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As at the end of March 2009, our direct or first-tier vendors stood at a total of 221 compared to 260 in our 2006 financial year. The consolidation of our vendor network enables the Group to build stronger, more meaningful relationships with capable and competent vendors. In turn, we can leverage on greater economies of scale, while enhancing overall delivery quality.
The vendor community will continue to play a very significant role in our journey forward. PROTON is committed to working even more closely with the vendors in order to improve their capability, efficiency and efforts in reducing the cost of components in the next financial year.
PROTON also remains true to its Early Vehicle Involvement programme where vendors are encouraged to participate in the vehicle conception stage. The input we have received during this stage for the Persona, Saga and Exora have proved to be invaluable especially in the areas of component supplies and managing cost efficiencies.
Moving Forward
For us, the road ahead will continue to be challenging. The passenger car sector locally and around the world, including the markets PROTON has gained a foothold in, will continue to see softened demands as the pace for economic recovery remains uncertain.
PROTON will have to be more assertive in communicating its products’ unique selling propositions to its markets both locally as well as internationally. Offering the “right car” at the “right time” and at the “right price” will have a universal appeal throughout all markets.
We will also continue to look in detail at our entire business value chain as we search for innovative solutions to derive greater cost efficiencies. We will keep working with and encouraging our vendors and distributors to play an integral role in this area.
At the same time, PROTON will continue to invest in human capital development by providing adequate training programmes to our workforce. The people in the Company must be fully exposed to best business practices in order to support our drive to build our presence in the export markets.
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The media preview of Satria Neo CPS.
Nevertheless, we believe that there are significant opportunities even during challenging times. The PROTON Group will work collectively as one to seize these opportunities and accelerate the brand to become one that is respected for its product and service quality. We have the foundation and nothing is impossible if we put our minds together towards enhancing the growth of the Company.
On this note, I am pleased to present to you our Operations Review that highlights key developments and initiatives undertaken in the Group’s core areas during the year under review.
I hope that you will find the Review informative and that it provides you with a clearer picture of our achievements and prospects todate.
Thank you for your continued support of PROTON.
Dato’ Haji Syed Zainal Abidin B Syed Mohamed Tahir Managing Director
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Engineering Services
The cornerstone of any successful automotive company ultimately rests in the company’s engineering prowess.
It is the foundation that drives product development and innovation which are integral to enabling an automaker to not only survive but to thrive in this ever-challenging operating environment.
Based on this premise, PROTON has remained committed towards advancing its engineering capabilities during the year under review. This was achieved via a steadfastness to pushing the envelope in developing new models and refreshing existing products, while continuously making progressive headway in research and development (R&D) as well as technical aptitude.
Knowing Our Markets While PROTON continued efforts to shorten its learning curve on the engineering front, we were also mindful of keeping our customers’ needs in mind as we invested our energies in strengthening the Company’s engineering capacity. But no matter how good our engineering abilities, PROTON cannot develop a successful product without understanding our end-users.
As such, throughout the past year, the Group deployed several teams of R&D engineers and technicians to key export markets, namely the Middle East, South Asia, South East Asia and China. The mission was to garner as much end-user details as possible including driving habits, road and weather conditions, as well as the needs and preferences of the individual markets.
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At the same time, the Group’s R&D homologation team worked tirelessly to keep abreast of regulatory and certification requirements in key markets. Collectively, the information gathered will be integral to ensuring that we develop products that are well in line with the markets’ needs.
Product Development The Group’s financial year under review was punctuated by a historic milestone when we introduced the Exora, the first PROTON multi-purpose vehicle (MPV). In addition, the past year also saw a series of product refreshments to our existing line of vehicles that were tailored to appeal to an even broader market segment.
Exora The Exora is a testament to the coming-of-age of the Group’s R&D and engineering capabilities. The model is the first in the Company’s 26-year history to be built without the feasibility prototypes and in a record time span of 18 months, which was a feat in itself.
The Exora is PROTON’s answer to the booming Malaysian MPV market and it was built around our very own well-received CamPro CPS 1.6 liter engine. It features a hydro-formed sub-frame and lightweight front-end module as well as tailored blanked body parts which are able to reduce the overall vehicle weight while significantly improving its safety performance. Having surpassed all European crash regulations, the Exora is at par with the other MPVs in the market.
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While the Exora is technologically sound, it was also developed with the end-user in mind. Based on the “car for the people” concept, the Exora was designed to carry seven adults in an exceptionally comfortable and roomy interior that has separate air-conditioning vents, a must-have in hot climates.
All in all, the Exora was created for practical daily use. It is meant to be safe on the road and withstand the rigours of everyday driving, while providing the space required for contemporary families of today. The Exora has already hit a chord with Malaysians and we expect it to continue surpassing expectations despite the challenging economic circumstances in other markets as well.
The country’s first MPV, the Exora, made its debut in April 2009.
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Product Refreshments
Persona SE Saga NGV The Persona, which was introduced in 2007, continues Sky-rocketing petrol prices in 2008 propelled the to receive encouraging support from its market rise of the economically practical natural gas vehicle segments. This is a reflection of its robust built- (NGV). While petrol prices have since plunged quality as well as appealing contemporary lines and dramatically, prices are expected to strengthen in contours. the long run, marking positive prospects for the NGV market. To sustain and leverage on the interest in this winner, PROTON introduced the enhanced Persona Special Edition (SE) in August 2008. The newly elegant SE is powered by the CamPro IAFM Engine which offers a smoother torque curve. At the same time, its interior has been enhanced with leather seats, steering wheel wrap as well as new gear knob and trims. The SE also features several must-have gadgets such as racing- inspired meter and dials, auto cruise control and GPS navigation kit.
On this score, PROTON has been investing time and Meanwhile, the exterior of the SE boasts a stylish body effort in NGV development programmes focused on kit, smoked headlamps, silver matte door handle, the Saga since 2007. This initiative came into fruition front and rear garnish, and new alloy-rim designs. with the launch of the Saga NGV variant, which is Overall, the Persona SE provides end-users with value- powered by a 1.6L CamPro IAFM engine. for-money comfort and premium accessories.
Being a specially-configured NGV, as opposed to an add-on or “modified” version most commonly seen on the road, the Saga NGV is able to cater to the growing NGV demand from both commercial and private car users locally and internationally.
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Saga 1.6L Taxi In line with the new regulation that requires all Malaysian taxis to be powered by engines above 1500cc, PROTON successfully developed a new product variant, the Saga 1.6L, during the financial year. The Saga 1.6L features the CamPro 1.6L IAFM engine, which is well-suited for the demanding requirements of taxis. This variant will offer the country’s taxi fleet a viable option to replace ageing vehicles.
Satria Neo CPS “Sporty, Youthful and Power” were the ideals promised by the enhanced Satria Neo CPS, which was unveiled in the first quarter of 2009. These ideals were delivered in the form of a brand new performance- oriented CamPro CPS engine, which pushes 125 horsepower or a 13.6% increase in output over the standard engine. The trendy enhanced Satria Neo CPS.
In addition, the Neo CPS also features improved drivability, whereby the engine adapts to its user’s driving style by automatically switching on the “Power Mode” when required. Coupled with the stylish body kit reminiscent of the original Satria GTi, as well as “race car” trappings of red-accent leather- wrapped steering wheel, leather seats, door trims and sporty gear knob, the Neo CPS has become an instant hit amongst young and trendy Malaysians. To cap it off, the Neo CPS proudly bears the “Handling by Lotus” badge at its rear to show its proven pedigree in international race events including the Merdeka Millenium Endurance Race (MME) and the Asian Touring Car championship.
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R&D – Towards Technology Advancements Electric Vehicle (EV) The automotive industry worldwide is going “green”. This trend has become more pronounced over recent years due to several factors including the growing public concern on safeguarding the environment. This has led to regulations by various Governments to curtail carbon emissions and skyrocketing fuel prices, as well as the global economic crisis that has fueled the need for more efficient, economical vehicles.
In view of this, the Malaysian Government has also been pro-active in encouraging the development of alternative fuel vehicles including electric powered vehicles. In answering the Government’s call, PROTON’s R&D team, along with its counterparts in Lotus Engineering, United Kingdom, developed two EV prototypes during the year under review. The prototypes were based on two models: the Persona as a performance EV and the Saga as a city-practical EV.
PROTON has made in-roads in the development of ‘green’ vehicles.
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Skilled human capital is vital in enhancing PROTON’s engineering capabilities.
Collaborations with Centres of Education Given PROTON’s role as a national automaker, the Group’s long-term strategy includes collaborating effectively and efficiently with local education institutions in the area of advanced automotive technology.
These collaborations, which are primarily in components, manufacturing and quality management, are integral to developing and enhancing our country’s human capital expertise in automotive engineering and technology. At the same time, the collaborations are providing the Group with a cost effective R&D platform via the sharing of resources including human resources and facilities.
Towards this end, the year under review was marked by a notable agreement sealed between PROTON and Universiti Teknologi Malaysia (UTM) to promote the exchange of technical expertise and information as well as to support the development of up-to-date R&D facilities, and coordinate advanced research initiatives. This partnership will play a role in augmenting PROTON’s R&D processes with a view to bringing products to market more rapidly.
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Fostering Technology Development In addition to strategic collaborations with institutions of higher learning, the Group is also spearheading efforts to entice young Malaysians to the field of automotive engineering and R&D.
In line with this objective, PROTON successfully organised the first Technology Week in the second half of 2008. The event, which was officiated by former Prime Minister YABhg Tun Abdullah Bin Haji Ahmad Badawi, was a platform to showcase the Group’s engineering capabilities and production facilities in order to inculcate a better understanding and interest in automotive technologies.
PROTON’s Technology Week 2009 featured numerous activities including technical presentations at our state-of-the-art Virtual Reality (VR) Centre, exhibition on computer- aided vehicle design and engine construction as well as vehicle testing sessions at PROTON’s test track, which proved to be a major attraction for the visitors.
At the end of Technology Week, the event had recorded some 50,000 visitors, comprising mainly faculty members and students from our country’s leading universities and education institutions as well as school students and the general public.
PROTON launches its three millionth car during the Technology Week.
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Our R&D capabilities have led to world-class breakthroughs like the CamPro engine.
Recognition in R&D PROTON’s R&D team has played a crucial role in developing products that are practical, value-for-money and enjoyable. It indeed takes a colossal team effort to develop a product that not only surpasses safety standards but also resonates with end-users in terms of the overall driving experience.
In recognition of the R&D team’s efforts, the Group successfully clinched the Malaysia Good Design Mark Award 2009 for the Satria Neo and Persona models. The award, in its 12th year and spearheaded by the Ministry of Science, Technology and Innovation via the Malaysian Design Council, acknowledges positive contributions made by the industry in the areas of R&D and product development.
PROTON team is recognised for R&D achievements.
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Manufacturing
The Group is fully cognisant that manufacturing excellence is essential to sharpen PROTON’s competitive edge in today’s increasingly challenging environment given the more sophisticated customer base.
To achieve new levels of excellence in spite of tough economic conditions, the production landscape at PROTON has had to evolve, especially in view of manufacturing new products such as the iconic Saga and Malaysia’s first home-grown multi-purpose vehicle (MPV), the Exora. The Group, as such, implemented several manufacturing processes to enhance quality and production levels to better meet the discerning needs of customers locally and globally.
During the period under review, owing to a high number of bookings for the Saga, the main plant in Shah Alam had to implement two shifts for the production of 6,122 units in April. Production volume was subsequently increased to 8,000 units a month by September 2008.
Production volume at the Tanjung Malim factory also saw an increase with the introduction of the Persona Special Edition (SE), a restyled version of the original Persona. However, due to the global economic meltdown in demand, sales of new cars dropped significantly in the second half of 2008. By December 2008, the plant in Tanjung Malim returned to a one-shift operation which was subsequently adopted by the main plant in January 2009.
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These measures were not only necessary to reduce cost and improve efficiency but also in preparation for the production of the Exora in Shah Alam. As a result, the excess manpower from Tanjung Malim was transferred to the Medium Volume Factory (MVF) in Shah Alam and no new recruitments were necessary. However, in order to handle the production of the Exora, which was launched in April 2009, the Waja production line at the MVF had to be discontinued in July 2008.
Notwithstanding these challenges, PROTON achieved a production volume of 157,643 units, representing an increase of 16% over the previous financial year. This comprised 87,053 units at the main plant, 3,932 units at the MVF and 66,658 units from the Tanjung Malim plant. Delivery increased to 157,211 units, of which 139,824 units were for the domestic market. This marked an increase of 23,094 units compared to the previous financial year.
PROTON’s channel stock position also increased to 17,925 units from 13,262 units. This is likely to remain until new cosmetic changes are implemented to create fresh excitement in the market. Production plans are also being continuously adapted to suit market conditions and to reduce further the stock channel.
The production volume is forecasted to increase by 4,789 units to 162,000 units in the next financial year. This is premised mainly on the strong demand for the newly launched Exora and the plan for more PROTON models to be upgraded.
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