Tengku Tan Sri Mahaleel looks relaxed and fit as he poses for photos on the beach. We are spending the morning on the resort island of Pangkor Laut. It is another day in paradise, but Proton's chief is vexed.
He wants to know the route I took from Kuala Lumpur to the island ferry. I had spent the previous day driving the Malaysian automaker's new Waja sedan, a vehicle Mahaleel hopes will upgrade Proton's image. I drove a mixture of freeway and minor roads.
Mahaleel's brow furrows. 'Oh no. I came on my bike test route,' he says. 'It's much better than those roads; a lot more exciting.' He should know. He owns a Ducatti motorbike, along with such four-wheeled exotica as a Porsche 911 and Mitsubishi Evo 6. Mahaleel clearly is a car guy. His driving skills were developed in road rallies during the 1980s, when he raced Nissans to national championships.
One must keep Mahaleel's past in mind to understand his plan to ensure his company's survival. Proton - more formally known as Perusahaan Otomobil Nasional Berhad - has an identity crisis. In 2005, Malaysia must reduce the hefty tariffs that allowed Proton to build a 65 percent share of the market. Mahaleel admits Proton - which until now has produced rebadged Mitsubishis - probably will lose half of its market share. His survival plan: Make Proton's cars more like those of Europe.
First, the company spent $200 million to acquire Britain's Lotus car and engineering company and build a new technical center near Kuala Lumpur. In 2002, Proton will introduce its version of the Lotus M250, a mid-engined sports car.
Lotus' engineering expertise also helped Proton produce the Waja, a well-engineered replacement for the Persona. Next, the company signed an agreement with Renault to use the French automaker's engines. Later this year, Proton will sell Waja sedans with a 1.8-liter Renault engine.
CUTTING TIES TO MITSUBISHI
As Proton becomes more European, it is relying less on its original partner, Mitsubishi Motors Corp. The Japanese automaker was Proton's first partner 15 years ago, when the newly formed Malaysian automaker began producing a rebadged Mitsubishi Lancer. Proton continued to assemble Mitsubishi models until this year.
Through the years, relations between the two partners have grown strained. Mitsubishi has not been enthusiastic about Proton's efforts to export cars to other Asian markets. So now Proton seeks other allies. Renault's powertrain is better than that provided by Mitsubishi, Mahaleel insists.
Has there been a breakdown in relations with the Japanese carmaker? The executive responds: 'They still have a seat on our board. What they do with that is up to them.'
Then Mahaleel suggested European automakers have the technical expertise Proton craves. 'The Japanese design philosophy is for fuel efficiency and lightweight bodies, while Germans have a much stiffer chassis, and this is what we are benchmarking. The Waja already meets all the European and Australian crash test standards.'
The Waja was benchmarked against the Audi A4, Opel Vectra, Peugeot 406 and Honda Accord. The car also looks modern, although the lack of texturing on the instrument panel mars the interior. Proton used thicker steel to improve the Waja's rigidity, and a road test demonstrates the car's smooth ride.
Even the name Waja - which means 'strong' in Malay - promotes Proton's desired new image. 'The perception of our cars even in Malaysia is a cheap Asian tin can,' Mahaleel says. 'We need to move away from that.'
Proton launched the Waja last year and will start exporting it soon. In its two major export markets - Australia and the United Kingdom - Proton will rename the car the Impian, which means 'dream come true' in Malay.
The Waja emphasizes Proton's shift from Mitsubishi. When it launched the car, Proton created a new badge, a stylized tiger head that will adorn new, all-Malaysian models as they appear. The old models based on Mitsubishis will carry the old badge. Proton is working to introduce more all-Malaysian models. The new Waja platform will be used in shortened form for the next-generation Wira. A sport coupe and multipurpose vehicle are other possibilities, although Mahaleel says he does not have firm plans for them.
To upgrade its model lineup, the Proton Group spent $200 million on research and development since 1996. Its R&D operation employs 1,600 people in Malaysia, the United Kingdom and the United States. The company has invested in computer-aided design, rapid prototyping and virtual reality simulation. Proton's aim: to design a vehicle in 30 months, down from 54 months. Proton also will rely on selected suppliers to design new vehicles. In the next decade, just 10 suppliers will become key partners, down from 190.
But Proton still needs help with powertrains. The company plans to design and produce its first engine in 2003, easing its reliance on Mitsubishi and Renault. Mahaleel admits he was interested in engine maker Longbridge Powertrain. Longbridge, located near the MG Rover plant in Birmingham, England, is for sale. Mahaleel also is talking to Indian manufacturer Mahindra & Mahindra Ltd.
Another partnership - a much-rumored linkup with MG Rover - is not going to happen. 'That story really annoyed me,' he said. 'People talked to MG Rover about it, but no one talked to me. There has been a lot of nonsense talked about our tie-up with Rover. We have no current interest in Rover.'
To recoup sales he expects to lose in Malaysia, Mahaleel is expanding into neighboring Asian markets. Proton has knockdown plants in Vietnam and the Philippines and plans to build a plant in Indonesia. The automaker has exported a few vehicles to Europe and Australia, but Southeast Asia will remain its main market. Mahaleel is realistic: He does not expect to convert Proton into a mega-automaker. 'There are plenty small-volume car manufacturers who can survive,' he says. 'If we build the right niche for ourselves, then we will survive as well.' Mahaleel says the company is in good financial condition, with $700 million in the bank. 'I believe that you need to have enough cash to see you through for a year with no income,' he says. 'That gives you 12 months to turn things around.'
Mahaleel smiles and offers a tantalizing prediction: 'We are working with Lotus on some very interesting projects. I believe we will survive.'
E-mail International Editor Chris Wright at [email protected]