Malaysian Government Loan Bails Out Troubled Proton

The Malaysian government is lending national automaker Proton 1.5 billion ringgit ($384 million) so it can pay its vendors for components.

International Trade and Industry Minister Mustapa Mohamed says in exchange the government is requiring Proton to come up with a business revival plan that includes seeking a strategic foreign partner.

“Proton must also come up with a turnaround plan, as well as a strategic plan to expand its domestic and international markets,” Mustapa says in a statement quoted by the government’s Bernama news agency.

Once-dominant Proton, now owned by Malaysian conglomerate DRB-Hicom, last year had a fourth-place 17% market share behind Perodua, Toyota and Honda.

The government also is creating a task force to watch over Proton’s transformation plan and ensure its success. It will review Proton’s previous business models and make recommendations to overcome any shortcomings it finds.

The task force will comprise three representatives from the government and three from the private sectors. The government will be represented by the Ministry of Finance, Ministry of International Trade and Industry and the Economic Planning Unit. The private sector will be represented by three senior Malaysian business officials.

Mustapa says Malaysia’s automotive industry is a strategic sector with 12,000 workers directly employed by Proton and about 50,000 working for vendor companies.

Mustapa says the task force will monitor the implementation of Proton’s business recovery plan which aims to make the company more competitive. It also will monitor a plan to increase Proton’s domestic market shares and to expand into international markets.

“The task force will also identify strategic partners from abroad in the near future to assist Proton in achieving its goal of improving competitiveness,” he says. “However, the task force will not be involved in Proton’s day-to-day operations as that will be the full responsibility of Proton’s management and board of directors.”

Malaysian Automotive Institute CEO Madani Sahari says Proton needs a better plan to improve and increase its market share. “By finding foreign partnership, the restructure plan may help Proton to survive,” he says in a statement published on the MAI website. “Proton (also) needs to review its aftersales service efficiency and to improve the services.”

Madani says the government authorized the loan so Proton could pay vendors facing financial problems because of Proton’s declining sales.