Early last week, I was pleasantly surprised by the reports by several analysts revealing that Proton has turned around after nearly a decade in the doldrums.
The analysts obtained confirmation from the management of DRB-Hicom Bhd, which holds a 51% stake in Proton, that the car maker had turned around in the first quarter of 2019.
Proton posted its first quarterly profit in the first quarter of 2019 after eight years due to cost-cutting measures, improved operation efficiency and higher sales, in part contributed by the new X70, according to Hong Leong Investment Bank Research.
After learning the good news, I am happy for Proton.
After eight years of failed rescue exercises that cost taxpayers billions, positive news has finally emerged from this brainchild of Prime Minister Tun Dr Mahathir Mohamad in the early 1980s.
But I feel Malaysia should give a big thumbs-up to Proton’s CEO Dr Li Chunrong, who took up this challenging job in October 2017 amid scepticism and doubt.
Li, an auto veteran who habitually works 12 hours per day, six-day weeks, was sent to Kuala Lumpur in 2017 by China’s Zhejiang Geely Holding Group after the latter acquired a 49% stake in the then ailing Proton, which had been looking for a strategic partner for years.
READ MORE: Proton targets to sell 100,000 cars in 2020
Proton is turning profitable under Dr Li's watch.
I remember during Li’s interview given to me in March 2019, where he declared: “Proton will turn around soon, at the earliest this year. It must see profits next year. If Proton cannot turn around in 2020, I will resign and go home.”
The last sentence did not appear in my March write-up on the advice of his media officers. But it certainly imparted a strong sense of optimism in Proton and its future.
While I was thinking Proton could see profits at the end of the year, the positive news came six months ahead of my estimate.
What is even more heartening is to read positive projections for Proton’s future.
“We expect stronger contribution by Proton (to DRB-Hicom’s results) in upcoming quarters, given the continued strong Proton sales volume on the back of attractive new model line-ups, ” says Hong Leong Investment Bank.
AmBank shares a similar sentiment.
In fact, the path to recovery by Proton started with the right choice of strategic partner and CEO.
Geely’s chairman Li Shufu, who had studied cars by tearing them apart and re-assembling them in his early years, is an astute businessman and patient negotiator. This can be felt after reading a book documenting the takeover of Proton, with vast details on how Li managed to win Dr Mahathir’s nod.
But of course, the track record of Geely in turning around Volvo and leading it to achieve record profits has been the most fascinating story for people in the industry.
Geely, a privately-owned firm that had encountered many political and financial setbacks in its early years, is the first Chinese auto company to go international.
However, the real challenge lies in managing Proton.
Soon after Li became CEO of Proton Holdings Bhd, most local car dealers were up in arms against him. They opposed his directive to upgrade their sales-only centres to bigger outfits to provide sales, service and repair services. Some even complained to the top political masters.
Li also faced protests from Proton car parts suppliers, when he set the target for them to cut prices by 30%.
But the brave new CEO refused to succumb to pressure as he tackled one issue after another. He did the necessary for the good of Proton.
Under Li’s fast-paced leadership, Proton has seen bold management revamp, major cost-cutting, stringent quality control, launch of the X70 and other facelifted Proton models.
When Li gave the first media interview to The Star in March, he had already overcome all the major obstacles and was seeing profits streaming in for Proton.
In other words, he has taken about one-and-a-half years to revitalise Proton – ahead of his first target of achieving break-even within three years (starting from October 2017).
Proton’s sales in the first six months of this year hit 43, 679 units, up 61% over the same period in 2018, from the launch of the X70 and facelifts for Iriz, Persona and Exora. The market is eagerly awaiting the launch of the X50 and revamped Saga.
The earlier-than-anticipated success of Proton has spurred discussions that loss-making Malaysia Airlines should take a leaf from Proton’s experience.
While the endeavour to seek a turnaround may be more complex for the national airline, the main criteria for success will still include capital injection, careful planning and strong professional management.
> This article first appeared in The Star newspaper. The views expressed here are solely that of the writer.
