PETALING JAYA: Soon after Dr Li Chunrong (pic) took up the challenging job as chief executive officer of Proton Holdings Bhd in October 2017 to rescue the then ailing car company, about 90% of car dealers were up in arms against him.
Dr Li was sent by China’s Zhejiang Geely Holding Group to Kuala Lumpur after the latter purchased a 49.9% stake in Malaysia’s national car company, which was looking for a foreign strategic partner after incurring huge losses and piling up debts for years.
“I did not realise the scope of the challenges facing me. But after accepting the appointment, I tackled one issue after another systematically,” Dr Li, 56, recalls in an exclusive interview with Sunday Star.
There was hue and cry over his directive to car dealers to upgrade their sales-only centres to bigger 3S and 4S centres to provide sales, service and repair services under one roof. Some even brought their complaints to the authorities.
But now, in the words of Dr Li, “95% of the dealers agree with me now” after they saw business improving and profitability.
The auto veteran, with over 30 years of industry experience behind him, also faced protests from Proton car parts suppliers when he set the target for them to cut prices by 30% to reflect international market levels.
“I was a controversial figure when I first came. I told our dealers: ‘If your showroom is small and dirty and you don’t provide service, value customers won’t go to you.’ Now we have finished almost all the upgrades and our dealers are getting more sales,” says Dr Li, who is known to call a spade a spade.
Dealers were convinced after visiting Geely and Volvo’s posh showrooms in China.
In his first-ever interview granted to a local mainstream media organisation, Dr Li claims that people in Proton are now “happy” with him.
These people include the key investors (Tan Sri Syed Mokhtar Albukhary of DRB-Hicom and Geely chairman Li Shufu), managers, dealers, suppliers and the union leaders.
Under Dr Li’s no-nonsense and fast-paced leadership, Proton has seen bold management revamp, major cost cutting, launch of new products, stringent quality, as well as entry of foreign talents with special expertise.
The bottom line speaks loudly. Sales are up following the launch of sports utility vehicle Proton SUV X70 in December. In the first two months of this year, sales rose 42% year on year to 12,300 units (which includes exports). Market share has also risen.
The market is full of praise and excitement for the X70, a new product jointly developed by engineers of Proton and Geely.
The personal target of the neat-looking leader is to sell 90,000 units this year, up 39% from 64,744 last year. Car enthusiasts have reported seeing updated car models and even a new smaller SUV model being tested on the road.
Financially, Proton is expected to break-even this year. Dr Li declares with confidence in Mandarin before repeating in English: “We are working hard to turn around Proton this year at the earliest. It must see profits in 2020.”
Before coming to Malaysia, he had rescued an ailing auto firm and established an auto company from scratch in China. In addition, Geely is known to have turned around Volvo after taking over the Swedish company.
Under the 10-year plan crafted by Dr Li in late 2017, Proton is to achieve profitability within the first three years. It aims to produce 400,000 cars in 2027 and command the biggest market share in Malaysia.
Dr Li says Proton is “on track” to achieve all the internal targets he set up.
In the lively 75-minute interview at Proton’s showroom in Shah Alam, the auto expert shares with Sunday Star the plan for Proton and the strategies he has deployed to restore confidence in Proton.
> In late 2017, Proton came out with a 10-year Master Plan and set various targets. Is it still on?
The plan you have seen may be one of the old versions of our early draft plan. We update our plan from time to time.
What we have not changed in the plan is that we want to be profitable as soon as possible. In 10 years, we want to command the largest market share in Malaysia and become the third biggest car manufacturer in Asean in terms of sales volume.
> What have you achieved so far?
Over the past months, we have focused on seven strategic thrusts to restore confidence and trust in Proton.
The first is on product. An enterprise can only do well if its product is excellent. Our customer survey shows that our image has gone up after the launch of Proton X70. It represents a Proton/Geely product.
This month, we are going to launch updated models of Iriz and Persona at competitive pricing. The improvement is on the exterior and interior, as well as quality.
Improvements are made to more than 300 items. This year, we will also see the production of CKD (completely knocked down) vehicles.
The second thrust of our strategy is on quality. After 12 months of operation, the quality of Proton cars improved by four times based on the Volvo standard.
Five or six years ago, Huawei was not famous. But today, it is famous due to its special and excellent products. Proton will be the same.
Our third thrust is on cost reduction. I set a target for our suppliers to reduce their costs by 30%. If Proton can reduce cost by 30%, why can’t they?
For Proton, we started with logistics. We reduced our regional car parts warehouses to four from 16, to bring down costs by 31%. In terms of savings, it is RM33mil per year.
When I was working in China, there was only one stockyard for Geely. China is bigger than Malaysia. Why do you need 16 here?
For components, we have brought down the cost of buying steel coils and resin by teaming up with Geely in bulk purchase.
As for other components, it is more difficult to cut cost. My target is 30%, but I only managed to cut 10% last year. So for this year, we have to work harder to cut another 20%.
The key problem in Malaysia is: there are not many vendors. Maybe only one for one car component. In China, there are many.
Hence, we need to give our vendors more business to help them make money. This is why we sped up rolling out the X70. We have to speed up product launches to help vendors.
Our fourth strategic thrust is on sales network: we have upgraded most of the sales centres to 3S and 4S sales/service centres. Proton now has 75 upgraded outlets. We aim to have 100 centres this year.
The fifth thrust is to optimise plant capacity. We are working towards moving all our manufacturing operations (scattered in various places) to our factory in Tanjung Malim.
The sixth thrust is on progressive localisation. We will invite our 17 foreign vendors to set up plants in Tanjung Malim via collaborative arrangements. This will bring in investments totalling RM217mil for Malaysia.
The seventh thrust is on talent. Behind every product is people and behind people is culture (team work, work ethics, integrity and attitude towards learning and achievement).
Now we have talents from 13 countries, compared to only one (Malaysia) previously.
On the board of directors (BOD), there are experts from China, the United States, Malaysia and Germany. In the seven-member top management team, we have local talents as well as those from China, Japan and Canada.
Without these talents, we could not have rolled out the X70 and updated the Iriz and Persona models.
READ MORE: Li Chunrong is a man on a mission
> Did you encounter unexpected challenges when you first helmed Proton?
Yes, I did. There were different voices within and outside the company, especially outside.
Initially, dealers were totally against the idea to invest in 3S/4S centres. The board asked me: ‘Why are you hiring so many talents from outside and not within?’
As a matter of fact, we did find talents within Proton. We have promoted many staff from within. We have also brought back some previous employees.
But for certain positions that demand specific expertise or capabilities, we need to hire talents from elsewhere.
I think everyone (BOD and management) can understand now. We need talents from outside to get jobs done.
> Your 10-year plan was drafted in 2017. After 17 months, are you changing your plan and strategy?
There is no significant change in the local economy and external environment, so I think there will be no change in our strategy.
The new government is very supportive of carmakers.
> The Prime Minister and Sultan of Johor have test driven the X70. What are their views?
Tun Dr Mahathir (Mohamad) has given the X70 a good rating. He is satisfied with it and posted a photo of it on his social media.
(In his speech during the launch of the X70 on Dec 12, Dr Mahathir said he was impressed with the level of sophistication and technological advances that went into the car)
Dr Mahathir is an expert and a professional. He understands cars. When he did test drives in Geely in China, the way he drove and his speed showed that he is a pro.
We presented him with our improved version of Iriz to get his feedback. He liked it. He particularly likes the rear of the car as it looks more sporty now.
The Sultan of Johor test drove the X70 too. He bought two units from us.
> What is your sales target for 2019?
The more, the merrier. This year, my personal target is to sell 90,000 units. Last year, we sold 64,744 cars.
For the first two months of 2019, sales improved 42% year on year. I think our performance is decent.
Our exports in 2018 totalled 1,388 units. Hopefully, the export number can hit 3,000 this year. We exported mainly to the Middle East last year.
We hope the Malaysian government can lend support to us to export more. There are many ways the government can help. In Thailand, about 50% of its cars produced are exported. For Malaysia, car exports account for only 3% to 5% of total production.
Dr Mahathir has said in several meetings that we should increase exports.
For the benefit of the economy, the government should support us to export more. This will benefit not only Proton, but also car-related industries.
In Malaysia, one in every six persons is involved in the automotive industry. It’s the same for China. If car exports can be increased, this will boost the Malaysian economy.Dr Mahathir was being far-sighted when he said he wanted to increase car exports.
People often ask: can we export to China? China is a big market. I think we should start with neighbouring countries first. Don’t go so far. Go slow and steady. Thailand, Indonesia, Pakistan and Bangladesh are our potential markets.
> Is there any plan to develop electric cars?
From the experience of China, developing electric cars is very difficult. It needs great support from the government. It is the same for the United States. If only private companies are doing it, it will be very difficult for electric car projects to be successful.
In the current Proton JV, we have the technology for electric vehicles. If Malaysia needs it and we have the support from the government, there would be no problem for us. We have the technology, technical know-how and the products. We can go ahead when there is greenlight and support.
(On July 5, 2017, Volvo announced that all new models would have electric motor from 2019 for future needs).
> Will Geely pump in more money to invest in Proton?
There are two major shareholders in Proton. They have invested RM1.2bil so far.
Further investment will depend on the needs and demands of the market.
> Are you confident that Proton will become a success story under your leadership?
Frankly speaking, I underestimated the situation at Proton. I might have changed my mind about coming here if I had known it would be so difficult. But I am happy now. I enjoy a lot of support from the two shareholders and management.
After 17 months, it is safe to say: things are on track. We are on a better footing now. There has been a smooth transition from a company owned by one boss to a JV with two bosses.
Now, we have a good BOD. The top management is very experienced. The atmosphere in the company is good and harmonious. We have good employees and we have the support of the union too.
Looking at our ability, capacity and performance, we are confident that Proton will be successful. It is best for Proton to turn around this year. If not, it will be next year. We are challenging ourselves for Proton to turn profitable this year. — HO WAH FOON and YIMIE YONG
