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PROTON Holdings Berhad (Company No.623177-A)
PROTON ‘VOICES ’PROTON 2008 Annual Report
A NEW SAGA BEGINS PROTON Holdings Berhad (Company No.623177-A)
’
01PROTON 2008 Annual Report
P R O T O N ‘ V O I C E S ’A company’s journey impacts its stakeholders as much as its
stakeholders impact the company. ‘Voices’ is about the people from
all walks of life who have played and continue to play diverse roles in
PROTON’s journey. Their heartfelt views, be that of a loyal customer,
stalwart shareholder, dedicated employee, visionary manager or
committed dealer and vendor, are captured throughout the PROTON
2008 Annual Report.
The cover of this Annual Report pays homage to PROTON’s stakeholders.
02 PROTON 2008 Annual Report
• 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.
Core Ideology
Audacious Goal
Driving Malaysia’s transformation into a leader in technology
and quality.
Vivid Description
We deliver innovative and superior quality products and services.
Our brands inspire confidence and pride.
Purpose
We are a passionate group of people working together, creating
exhilarating products and services for global markets, synonymous
with great styling, innovation and leading technology.
03PROTON 2008 Annual Report
• corporate mantra & core values
Core Values
Quality
We make products that work the first time, every time.
Customer Focus Customers are the source of our income. We deliver on our promises
to our customers’ satisfaction.
Innovation
We challenge convention, always seeking new and better ways of
doing things. We view change as opportunity.
Teamwork We trust, respect and share knowledge to foster teamwork at
the workplace.
Speed We have a “can-do” attitude and will not rest until the problem is
solved. We have an inherent sense of urgency in everything we do.
Caring As a responsible corporate citizen, we invest in safety, health and
the environment.
04 PROTON 2008 Annual Report
• PROTON’s policies
Environmental, Health and Safety Policy
“The company shall provide the resources necessary to ensure a safe,
healthy and conducive working environment.”
Our mission is to strive towards excellence in all aspects of our
operations. In achieving our goal, it is necessary for us to promote and
protect the health and safety of our employees and ensure that our
environment is unharmed.
We are committed to provide a conducive, safe and healthy working
environment for our employees and to ensure this, it is our policy to:-
• Take responsibility for the safety and health of our employees;
• Provide the appropriate resources;
• Take all action necessary to remedy any non-compliance;
• Monitor and maintain high standards in environmental protection
as well as health and safety measures.
In implementing our policy, we shall, where reasonably practicable:-
• 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;
• Provide adequate information and assistance to our employees and
our neighbours to avoid unacceptable effects on the environment.
05PROTON 2008 Annual Report
• PROTON’s policies
Quality Policy
“PROTON is committed to manufacture quality cars, knock-down parts
and spare parts that satisfy customer requirements and meet the
required safety and environmental standards of each market.”
To achieve the above commitment, PROTON shall:-
• Ensure quality as the Number One work ethics in all operations;
• Establish an effective and efficient Quality System based on the
requirements of ISO 9001:2000 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.
To assist us in achieving our goals we shall work together and towards
this end, our employees shall:-
• Abide by all rules and regulations concerning the workplace;
• Utilise all the facilities provided by the management in a safe and a
proper manner;
• Maintain good work practices;
• Actively participate in all the Environmental, Health and Safety
(EHS) programmes.
This is our objective and it is our intention to put this EHS Policy into
action and to make it our way of life.
“Environment, health and safety are our priority.”
06 PROTON 2008 Annual Report
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
34 Senior Management
36 Other Senior Officers
40 Chairman’s Statement
54 Managing Director’s Review
Contents PROTON 2008 Annual Report
07PROTON 2008 Annual Report
62 Operations Review
106 Statement on Corporate Governance
123 Additional Compliance Information
126 Statement on Internal Control
130 Risk Management
136 Calendar of Events 2007 - 2008
144 Statutory Financial Statements
237 Shareholdings Statistics
240 Properties Owned by PROTON Group
244 Share Price and Volume Traded
245 Notice of Annual General Meeting
248 Statement Accompanying the Notice of
Annual General Meeting
Form of Proxy
08 PROTON 2008 Annual Report
09PROTON 2008 Annual Report
“ A big thank you
to our Prime Minister. ”A new saga begins for
PROTON as our Prime
Minister accompanied by
the Group’s Chairman and
Managing Director launch
the latest addition to our
fleet of cars.
010 PROTON 2008 Annual Report
• financial calendar
15 August 2007
• Notice of Fourth (4th) Annual General Meeting
28 August 2007
• Unaudited First (1st) Quarter results for the period
ended 30 June 2007
6 September 2007
• Fourth (4th) Annual General Meeting
30 November 2007
• Unaudited Second (2nd) Quarter results for the
period ended 30 September 2007
21 February 2008
• Unaudited Third (3rd) Quarter results for the
period ended 31 December 2007
26 May 2008
• Unaudited Fourth (4th) Quarter results for the
period ended 31 March 2008
31 July 2008
• Audited accounts for the financial year ended
31 March 2008
6 August 2008
• Notice of Fifth (5th) Annual General Meeting
28 August 2008Fifth (5th) Annual General Meeting
010 PROTON 2008 Annual Report
011PROTON 2008 Annual Report
• key financial indicators
33.6
Basic earnings per share (sen)
(107.3)
8.5
80.692.9
Net assets per share (RM)
9.879.52
10.6910.6710.14
Dividend paid (RM’ million)
93.3
137.3
54.9
27.5
-
Retained profits carried forward (RM’ million)
4,611.8
4,916.9 4,908.7
4,291.7
4,476.2
2004 2005 2006 2007 2008 2004 2005 2006 2007 2008
2004 2005 2006 2007 2008 2004 2005 2006 2007 2008
012 PROTON 2008 Annual Report
• summary of financial highlights for five years
2008 2007 2006 2005 2004
(Restated) (Restated) (Restated) (Restated)
RM million RM million RM million RM million RM million
NON-CURRENT ASSETS
Property, plant and equipment 3,150.4 3,169.5 3,302.9 3,288.9 2,879.9
Prepaid land lease payments 24.1 9.9 10.0 10.1 10.2
Goodwill 29.0 29.0 29.0 29.0 29.0
Intangible assets 275.2 169.1 18.0 14.3 18.3
Associated companies 165.4 169.8 160.4 165.6 171.9
Jointly controlled entities 192.7 223.6 245.3 251.8 108.9
Investments 10.4 10.4 10.4 6.3 6.3
Deferred tax assets - - 105.8 38.4 46.6
Total Non-Current Assets 3,847.2 3,781.3 3,881.8 3,804.4 3,271.1
CURRENT ASSETS
Inventories 1,100.3 1,273.6 1,389.0 967.1 795.8
Receivables 1,099.0 1,192.0 1,244.0 1,403.2 930.0
Current investments 20.8 73.4 212.0 201.5 182.0
Deposit, bank and cash balances 1,226.0 626.5 1,586.0 2,454.7 2,877.4
Total Current Assets 3,446.1 3,165.5 4,431.0 5,026.5 4,785.2
TOTAL ASSETS 7,293.3 6,946.8 8,312.8 8,830.9 8,056.3
BALANCE SHEETS AS AT 31 MARCH
013PROTON 2008 Annual Report
• summary of financial highlights for five years
2008 2007 2006 2005 2004
(Restated) (Restated) (Restated) (Restated)
RM million RM million RM million RM million RM million
EQUITY AND LIABILITIES
Share capital 549.2 549.2 549.2 549.2 549.2
Other reserves 395.8 389.7 412.7 393.8 406.1
Retained profits 4,476.2 4,291.7 4,908.7 4,916.9 4,611.8
Equity attributable to equity holders of the Company 5,421.2 5,230.6 5,870.6 5,859.9 5,567.1
Minority interest - - - 0.3 -
Total Equity 5,421.2 5,230.6 5,870.6 5,860.2 5,567.1
NON-CURRENT LIABILITIES
Long term liabilites 230.5 181.6 100.3 759.6 447.4
Deferred tax liabilities 2.4 0.8 0.8 1.1 1.0
Total Non-Current Liabilities 232.9 182.4 101.1 760.7 448.4
CURRENT LIABILITIES
Payables 1,637.6 1,531.6 2,324.2 2,207.4 1,900.5
Taxation 1.6 2.2 16.9 2.6 140.3
Total Current Liabilities 1,639.2 1,533.8 2,341.1 2,210.0 2,040.8
Total Liabilities 1,872.1 1,716.2 2,442.2 2,970.7 2,489.2
TOTAL EQUITY AND LIABILITIES 7,293.3 6,946.8 8,312.8 8,830.9 8,056.3
BALANCE SHEETS AS AT 31 MARCH
014 PROTON 2008 Annual Report
• summary of financial highlights for five years
RM million 2008 2007 2006 2005 2004
(Restated) (Restated) (Restated) (Restated)
Revenue 5,621.6 4,687.3 7,796.9 8,483.3 6,361.2
Profit/(Loss) before taxation 144.3 (618.1) 18.0 399.3 556.2
Profit/(Loss) after taxation 184.6 (589.5) 46.7 442.4 510.3
Retained profit attributable to shareholders 4,476.2 4,319.2 4,963.6 5,054.2 4,705.1
Dividend - (27.5) (54.9) (137.3) (93.3)
Retained profit carried forward 4,476.2 4,291.7 4,908.7 4,916.9 4,611.8
SHARE INFORMATION
2008 2007 2006 2005 2004
Per Share
Basic earnings/(loss) (sen) 33.6 (107.3) 8.5 80.6 92.9
Tax-exempt dividend paid - 5.0 10.0 25.0 17.0
Net assets 9.87 9.52 10.69 10.67 10.14
Issued share capital 549,213 549,213 549,213 549,213 549,213
INCOME STATEMENTS FOR THE YEAR ENDED 31 MARCH
015PROTON 2008 Annual Report
016 PROTON 2008 Annual Report
• corporate profile016 PROTON 2008 Annual Report
Since its launch, the new Saga has become the fastest selling PROTON model to date
017PROTON 2008 Annual Report
• corporate profile
• 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 was incorporated on 7 May 1983 with three
primary national policy objectives:
“ The PROTON Dream is now a reality. PROTON,
the nation’s pride and joy, has also proven to be
a success on the international front. With its wide
range of cars, PROTON caters to different groups
and levels of people. I myself am the proud owner
of a PROTON Perdana and I fully support and look
forward to PROTON’s greater success in the near
future. When I walked into PROTON, I felt an aura
of happiness and unity among the staff, just like one
big happy family – a key element for any
successful company. ”Datuk Dr Sheikh Muszaphar Shukor
Malaysia’s First Angkasawan
018 PROTON 2008 Annual Report
• corporate profile
PROTON commands a substantial share of the domestic market for passenger cars and
over the years has been building up distribution networks in key market centres across the
four regions:
• South-East Asia,
• the Middle East,
• United Kingdom / Western Europe, and
• Australasia.
The main business activities of the Group encompass vehicle engineering, research &
development, manufacturing, distribution 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 portfolio
of PROTON models includes the reliable family-sedan Waja, the stylish Gen.2, the
elegant Perdana V6, the versatile Arena, the proven Saga range, the fun-to-drive Savvy,
019PROTON 2008 Annual Report
• corporate profile
the desirable sporty Satria Neo and the ‘2008 Best Model of the Year’ winner,
the Persona. The Group also has in its portfolio, the world-renowned Lotus sports cars,
with models such as Elise, Esprit, Exige, Europa and the recently unveiled Evora (which
will be available in the first half of 2009) to suit a range of customer demands and
preferences.
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 almost 12,000 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 and after-sales 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.
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
020 PROTON 2008 Annual Report
• awards and recognition
Awards and Recognition
PROTON received the following awards from various organisations as
testimony of the Group’s efforts in leading the Malaysian automotive
industry as well as making in-roads in branding and motorsports.
Awards 2008• Reader’s Digest Trusted Brand 2008 Gold Award for Car Category.
• Asian Auto - VCA Auto Industry Awards 2008 - Best People’s Car
Award for PROTON Saga.
• Asian Auto - VCA Auto Industry Awards 2008 - Best Comeback
Brand Award for PROTON.
• China Press’ 2008 Chinese New Year Greeting Advertisement
Award, Full Colour Category.
• Frost & Sullivan’s 2008 Asean Automotive Awards - 2008 Best
Model of the Year Award for the Persona.
Awards 2007• Reader’s Digest Trusted Brand 2007 Gold Award for Car Category.
• The Malay Mail declared the PROTON Satria Neo, winner of the
Coolest Car of 2006.
Awards 2006• Reader’s Digest Trusted Brand 2006 Gold Award for Car Category.
• Nanyang Siang Pau’s 2006 Chinese New Year Greeting
Advertisement Award - Full Colour Category - 5th Runner Up.
021PROTON 2008 Annual Report
• awards and recognition
Awards 2005• Reader’s Digest Super Brand 2005 Gold Award for Car Category.
• Merdeka Millennium Endurance Race 2005 - 1st place-Overall
and Class ‘O’ Winner.
• Malaysian Rally Championship 2005 - Overall Class Winner
P10 Category.
Awards 2004• Malaysia’s Best Brand Award.
• National Creativity & Innovation Award 2004.
• PROTON Waja - 4.5 star out of 5 star rating for being the Most
Economical and Greenest Sedan in Australia.
Awards 2003• Industry Excellence Award 2003, Quality Management Category III.
• Industry Excellence Award 2003.
• Best Landscape Competition (First Place - Factory Category).
Awards 2002• Best Landscape Competition (Second Place - Factory Category).
• Appreciation Award for Contribution to the Development of
Malaysian Motorsports for 2002.
• KPMG/The Edge Shareholder Value Award 2002 Sectoral Winner -
Industrial Market. The award measured economic profit as a
percentage of invested capital.
• Highest Increase in Turnover Award among companies listed on
the then Kuala Lumpur Stock Exchange (now Bursa Malaysia Securities
Berhad) for financial year 2002-2003.
• Motor Vehicles and Transport Equipment Sector Leader Award
among the top 1,000 Malaysian companies.
• Highest Increase in Net Profit Award among companies listed
on the Kuala Lumpur Stock Exchange for financial year 2002-2003.
Awards 2001• Certificate of Merit for 2001 NACRA Award.
• Appreciation Award for sponsoring ‘Le Tour de Langkawi’
2001 event.
• Superbrand Award for Automotive Sector for 2001.
Awards 1999• Satria GTI - Wheels Magazine Best Hot Hatch Buy Year 1999.
022 PROTON 2008 Annual Report
• corporate information
Corporate Information
Board of Directors Date of Appointment
• Dato’ Mohammed Azlan Bin Hashim
Chairman/Non-Independent Non-Executive Director
• Dato’ Haji Syed Zainal Abidin B Syed Mohamed Tahir
Managing Director
• Tuan Haji Abdul Jabbar Bin Abdul Majid
Independent Non-Executive Director
• Tuan Haji Abdul Kadir Bin Md Kassim
Independent Non-Executive Director
• Dato’ Michael Lim Heen Peok
Independent Non-Executive Director
• Datuk Zalekha Binti Hassan
Non-Independent Non-Executive Director
• Encik Mohammad Zainal Bin Shaari
Non-Independent Non-Executive Director
• Dato’ Ahmad Bin Haji Hashim
Non-Independent Non-Executive Director
• Dato’ Mohd Izzaddin Bin Idris
Non-Independent Non-Executive Director
17 December 2004
1 January 2006
12 April 2004
10 March 2005
15 September 2006
11 February 2008
17 December 2004 (Resigned w.e.f. 3 April 2008)
26 October 2005 (Resigned w.e.f. 11 February 2008)
15 September 2006 (Resigned w.e.f. 30 November 2007)
023PROTON 2008 Annual Report
• corporate information
Board Executive Committee (“Board Exco”) • Dato’ Mohammed Azlan Bin Hashim - Chairman • Dato’ Haji Syed Zainal Abidin B Syed Mohamed Tahir • Dato’ Michael Lim Heen Peok • Ms Vimala Menon (appointed w.e.f. 16 June 2008) • Dato’ Mohd Izzaddin Bin Idris (Resigned w.e.f. 30 November 2007)
Board Audit Committee • Tuan Haji Abdul Jabbar Bin Abdul Majid - Chairman • Tuan Haji Abdul Kadir Bin Md Kassim • Dato’ Michael Lim Heen Peok • Encik Mohammad Zainal Bin Shaari (Resigned w.e.f. 3 April 2008)
Board Risk Management Committee • Tuan Haji Abdul Kadir Bin Md Kassim • Datuk Tan Kim Leong
Board Nomination & Remuneration Committee • Dato’ Mohammed Azlan Bin Hashim - Chairman • Encik Md Ali Bin Md Dewal • Encik Ahmad Tajuddin Bin Abdul Carrim • Dato’ Michael Lim Heen Peok
Board Disciplinary Committee • Dato’ Mohammed Azlan Bin Hashim - Chairman • Tuan Haji Abdul Kadir Bin Md Kassim • Encik Md Ali Bin Md Dewal • Tuan Haji Yusof Bin Ahmad (Appointed w.e.f. 21 February 2008) • Dato’ Ahmad Bin Haji Hashim (Resigned w.e.f. 21 February 2008)
AUDITORS PricewaterhouseCoopers (Chartered Accountants) Level 10, 1 Sentral, Jalan Travers Kuala Lumpur Sentral PO Box 10192 50706 Kuala Lumpur, Malaysia Tel : 03 - 2173 1188 Fax : 03 - 2173 1288
REGISTERED OFFICE HICOM Industrial Estate Batu Tiga, 40000 Shah Alam Tel : 03 - 8026 9741 Fax : 03 - 8026 9744
REGISTRAR TENAGA KOPERAT SDN BHD G-01, Ground Floor, Plaza Permata Jalan Kampar, Off Jalan Tun Razak 50400 Kuala Lumpur Tel : 03 - 4041 6522 Fax : 03 - 4042 6352
STOCK EXCHANGE LISTING Main Board of Bursa Malaysia Securities Berhad
COMPANY SECRETARY Encik Mohd Nizamuddin Bin Mokhtar (LS 006128)
INVESTOR RELATIONS Mr Kelvin LowTel : 03 - 5191 5864
024 PROTON 2008 Annual Report
• group operations
Engineering Services Lotus Advance Technologies Sdn Bhd (100%)
Proton Engineering Research Technology Sdn Bhd (100%)
Lotus Group International Limited (100%)
Group Lotus Plc (100%)
Lotus Cars Ltd (100%)
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%)
Marco Acquisition Corporation (USA) (100%)
Manufacturing Proton Tanjung Malim Sdn Bhd (100%)
Perusahaan Otomobil Nasional Sdn Bhd (100%)
Proton Automobiles China Ltd (BVI) (100%)
Goldstar Proton Automobiles Co Ltd (49%)
PT Proton Cikarang Motors (Indonesia) (100%)
(formerly known as PT Proton Tracoma Motors (Indonesia))
Miyazu (Malaysia) Sdn Bhd (51%)
PROTON Holdings Berhad
024 PROTON 2008 Annual Report
025PROTON 2008 Annual Report
• group operations
Sales & Distribution
Proton Marketing Sdn Bhd (100%)
Proton Edar Sdn Bhd (100%)
Proton Cars (UK) Ltd (100%)
Proton Cars Australia Pty Limited (100%)
Proton Motors (Thailand) Limited (100%)
Proton Singapore Pte Ltd (100%)
Proton Parts Centre Sdn Bhd (55%)
PT Proton Edar Indonesia (95%)
Proton Cars Benelux NV SA (Belgium) (99%)
Property
Proton Hartanah Sdn Bhd (100%)
Proton Properties Sdn Bhd (100%)
Proton City Development Corporation Sdn Bhd (40%)
Financial Services Proton Commerce Sdn Bhd (50%)
Lotus Finance Ltd (49.9%)
Proton Finance Ltd (49.99%)
Investee & Associate Companies
Exedy (Malaysia) Sdn Bhd (45%)
Netstar Advanced Systems Sdn Bhd (40%)
PHN Industry Sdn Bhd (35%)
Marutech Elastomer Industries Sdn Bhd (25%)
Vina Star Motors Corporation (Vietnam) (25%)
Aluminium Alloy Industries Sdn Bhd (19%)
Technomeiji Rubber Sdn Bhd (15%)
Peps-JV Sdn Bhd (10.50%)
Ara Borgstena Sdn Bhd (6.67%)
Others Yayasan Proton
Lotus Pension Trustees Ltd (100%)
Lotus Cars Foundation (100%)
025PROTON 2008 Annual Report
026 PROTON 2008 Annual Report
• board of directors026 PROTON 2008 Annual Report
027PROTON 2008 Annual Report
• board of directors027PROTON 2008 Annual Report
Standing (left to right)
Dato’ Michael Lim Heen Peok,
Datuk Zalekha Binti Hassan,
Tuan Haji Abdul Jabbar Bin Abdul Majid,
Tuan Haji Abdul Kadir Bin Md Kassim.
Sitting (left to right)
Dato’ Mohammed Azlan Bin Hashim,
Dato’ Haji Syed Zainal Abidin B Syed Mohamed Tahir.
028 PROTON 2008 Annual Report
• profile of directors
Dato’ Mohammed Azlan Bin HashimChairman/Non-Independent Non-Executive Director
Aged 51, Malaysian
Dato’ Mohammed Azlan Bin Hashim was appointed as Director of the
Company on 17 December 2004 and subsequently Chairman of the Board
on 7 February 2005. He was nominated to the Board by Khazanah Nasional
Berhad. A Chartered Accountant by profession, Dato’ Azlan graduated
with a Bachelor of Economics from Monash University, Australia. He is a
member of the Institute of Chartered Accountants, Australia, Malaysian
Institute of Accountants, Fellow Member of Malaysian Institute of Directors,
Fellow Member of the Institute of Chartered Secretaries and Administrators
and Hon. Member of The Institute of Internal Auditors, Malaysia.
Dato’ Azlan has extensive experience in the corporate sector including
financial services and investments. Among others, he has served as Chief
Executive / Executive Director of Bumiputra Merchant Bankers Berhad,
Group Managing Director of Amanah Capital Malaysia Berhad and Executive
Chairman of Bursa Malaysia Berhad (formerly known as Kuala Lumpur Stock
Exchange) Group. Dato’ Azlan is a Board Member of various government
and non-government related organisations including Labuan Offshore
Financial Services Authority, Employees Provident Fund, Khazanah Nasional
Berhad, and Malaysian Industry-Government Group for High Technology.
He was appointed Chairman of Universiti Darul Iman Malaysia in 2006.
Amongst others, Dato’ Azlan is also currently the Chairman of public listed
entities D&O Ventures Berhad, Sunway Infrastructure Berhad and a Director
of Scomi Group Berhad.
Within PROTON Holdings Berhad, Dato’ Azlan serves as Chairman of the
Board Executive Committee, Board Nomination & Remuneration Committee
and the Board Disciplinary Committee. Dato’ Azlan also sits on the Boards
of various subsidiaries of PROTON.
Dato’ Azlan has attended all Board of Directors’ Meetings held 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.
“ PROTON’s financial results for this calendar year
is a clear indication that the Group has progressed
and is moving in the right direction. ”
029PROTON 2008 Annual Report
• profile of directors
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 is the Chairman of PROTON’s
Management Committee.
Dato’ Haji Syed Zainal 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 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 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 has attended all Board of Directors’ Meetings
held 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.
Dato’ Haji Syed Zainal Abidin B Syed Mohamed Tahir Managing Director
Aged 46, Malaysian
“ Our improved performance for the year under
review was the result of us achieving our short-term
objectives and targets, which are themselves stepping
stones toward reaching our long-term goals. ”
030 PROTON 2008 Annual Report
• profile of directors
Tuan Haji Abdul Jabbar Bin Abdul Majid was appointed as a Director
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 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. He was a member of the Senate of the Open University
Malaysia Board.
Tuan Haji Abdul Jabbar is currently the Chairman of the Board Audit
Committee and a member of the Board Disciplinary Committee.
Besides PROTON, he sits on the Boards of Tradewinds Corporation
Berhad (“Tradewinds”), Opcom Holdings Berhad and Bank Muamalat
Malaysia Berhad. He is also the Director of Golden Pharos Berhad and
the Chairman of the respective Board Audit Committees of Tradewinds
and Bank Muamalat.
Tuan Haji Abdul Jabbar attended all Board of Directors’ 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 shareholder of the Company. He has had no conviction for
any offences within the past ten (10) years.
Tuan Haji Abdul Jabbar Bin Abdul MajidIndependent Non-Executive Director
Aged 63, Malaysian
“ Good corporate governance is the foundation
of the culture and business practices of the
PROTON Group. ”
031PROTON 2008 Annual Report
• profile of directors
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 also the Director of UEM Group Berhad
(formerly known as United Engineers (Malaysia) Berhad), UEM World
Berhad, Suria Capital Holdings Berhad, TIME dotCom Berhad, Sino Hua-
An International Berhad and Petroliam Nasional Berhad (Petronas). He
is also a Director of a few private companies and Chairman of the
Committee of Labuan International Financial Exchange.
Tuan Haji Abdul Kadir has attended all Board of Directors’ Meetings
held during the Financial Year. He has no conflict of interest with the
Company and does not have any 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.
Tuan Haji Abdul Kadir Bin Md KassimIndependent Non-Executive Director
Aged 68, Malaysian
“ PROTON regards risk management as an
integral part of the Group’s operations and a
consistent, disciplined and systematic approach for
managing risks was endorsed and implemented
within the Group. ”
032 PROTON 2008 Annual Report
• profile of directors
Dato’ Michael Lim was appointed to the Board on 15 September
2006. He is a member of the Board Executive Committee,
Board Audit Committee and Board Nomination & Remuneration
Committee. He also sits on the Boards of various companies within
the PROTON Group.
After graduating with a first class honours degree in Engineering from
the University of Strathclyde, in the United Kingdom, Dato’ Michael
Lim began his career with the UMW Group in 1975, in various senior
managerial positions. In 1986 Dato’ Michael 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’ Michael Lim retired in 2004.
Currently, Dato’ Michael Lim is the Chairman of Furniweb Industrial
Products Bhd, an export oriented manufacturing company with plants
in Malaysia, Vietnam and Thailand. He also serves on the Board of
Alliance Bank Malaysia Berhad.
Dato’ Michael Lim has attended all Board of Directors’ 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.
Dato’ Michael Lim Heen PeokIndependent Non-Executive Director
Aged 60, Malaysian
“ We are making good progress in improving our
product performance, functionality and quality. ”
033PROTON 2008 Annual Report
• profile of directors
Datuk Zalekha Binti Hassan was appointed as a Director 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 Universiti Malaya.
Datuk Zalekha was previously with Konsortium Baja Nasional
Berhad, Tenaga Nasional Berhad, Putrajaya Holdings and Multimedia
Development Corporation (MDEC).
She is currently a Director of Telekom Malaysia Berhad, Penang Port
Sdn Bhd and Perbadanan Kemajuan Negeri Selangor (PKNS).
Datuk Zalekha has attended all Board of Directors’ Meetings during the
Financial Year since her appointment. 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.
Datuk Zalekha Binti HassanNon-Independent Non-Executive Director
Aged 55, Malaysian
“ PROTON is a key player in the national
automotive industry. The Government and people of
Malaysia have high aspirations for PROTON. Thus,
PROTON endeavours to be competitive with other
car makers in this region. ”
034 PROTON 2008 Annual Report
• senior management
Sitting (left to right) MICHELE KYTHE LIM BENG SZE General Manager, Group Legal Division
DATO’ HAJI SYED ZAINAL ABIDIN B SYED MOHAMED TAHIR Managing Director
MOHAMAD SHUKOR BIN IBRAHIM Chief Executive Officer, Proton Edar Sdn Bhd
Standing (left to right) VIMALA MENON Director, Finance & Corporate Affairs Division
RAZIF BIN AHMAD Director, Group Procurement Division
MOHD NIZAMUDDIN BIN MOKHTAR General Manager, Group Secretarial & Compliance Division
HASNAH BINTI ISMAIL Director, Group Human Resource Division
035PROTON 2008 Annual Report
• senior management
“ PROTON has demonstrated to its stakeholders
its ability to transform into a viable and profitable
automotive company in spite of our numerous
challenges. ” - DATO’ HAJI SYED ZAINAL ABIDIN B SYED MOHAMED TAHIR
“ It’s about creating trust and positive partnerships
with vendors and suppliers. ” - RAZIF BIN AHMAD
“ No doubt PROTON is bouncing back and it will be
stronger than before. You know that the adrenalin
is flowing in each of PROTON’s employees. This
momentum must be supported, carried and
elevated to the next level and all of us play a part in
it. Together we will make it happen. ” - MOHAMAD SHUKOR BIN IBRAHIM
“ Teamwork, commitment and dedication are
certain to lift PROTON to greater heights. ”
- VIMALA MENON
“ Developing PROTON’s competitive edge by
building the organisational capabilities – uniquely
through the hearts and minds of employees and
maintaining a balanced work life. ”
- HASNAH BINTI ISMAIL
“ ...an invigorating and challenging yet colourful
period as PROTON enters the dawn of a new era.
What’s even more exhilarating is to be a part of
this revival... ” - MOHD NIZAMUDDIN BIN MOKHTAR
“ PROTON cuts to the core of almost all Malaysians
and we want to see it succeed. As Management
and as Malaysians we are all the more driven to
see that it does happen. ” - MICHELE KYTHE LIM BENG SZE
036 PROTON 2008 Annual Report
Abdul Jamil Bin JohariGeneral Manager, Group Security
Mohd Raziff Bin Ahmad General Manager, Manufacturing (Tanjung Malim)
Mohamad Azeman Bin Redzuan Director, PT Proton Cikarang, Indonesia
Low Pheng General Manager, Group Internal Audit
Tajul Zahari Bin Abu BakarGeneral Manager, Engineering
Azmi Bin IdrisHead, Group Quality Management
Muhammad Aris Bin Anuar General Manager,Manufacturing (Shah Alam)
Wan Nadzree Bin JaafarGeneral Manager, Corporate Planning
Dr. Shamsuddin Bin BaharinGeneral Manager, Transformation Office & Special Projects
Hamdan Bin Mohd NorGeneral Manager, International Sales & Services
Tan Chun WengGeneral Manager, Group Finance
Mohd Nadzir Bin Che Omar General Manager, Proton Properties Sdn Bhd
• other senior officers
Other Senior Officers
037PROTON 2008 Annual Report
(left to right) Michael J. KimberleyChief Executive Officer, Group Lotus Plc
Brian CollierManaging Director, Proton Cars (UK) Ltd
John StartariManaging Director, Proton Cars Australia Pty Limited
(left to right) Moses TanManaging Director, Proton Singapore Pte Ltd
Djunaedi HadiwidjajaPresident Director, PT Proton Edar Indonesia
Faridahanom Binti Idris Senior Manager, Corporate Communications & Events
Zamariah Binti IsmailGeneral Manager, Group Information & Communication Technology
Izwan Bin Zainuddin Senior Manager, Corporate Finance
• other senior officers
Heads of International Subsidiaries
038 PROTON 2008 Annual Report
039PROTON 2008 Annual Report
“ Human Capital
is PROTON’s most
important asset. ”PROTON’s Chairman
greeting staff during a visit
to the manufacturing plant.
040 PROTON 2008 Annual Report
Dato’ Mohammed Azlan Bin Hashim
Chairman / Non-Independent Non-Executive Director
• chairman’s statement
041PROTON 2008 Annual Report
• chairman’s statement
“ 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, 2008. ”Industry OverviewThe year under review saw signs of recovery for the Malaysian automotive industry. Despite
the challenges that persistently impact the industry, which include the ever-increasing cost of
manufacturing and raw materials, shaken consumer confidence stemming from the threat
of global economic slowdown as well as an over-crowded operating environment, there was
a notable uptrend registered in vehicle sales from the second half of 2007. This positive
turnaround continued through to the first half of 2008, further underlining the confidence
that the sector is undergoing a revival.
Whilst there was cautious optimism throughout the industry in 2007, total Malaysian vehicle
sales for the year recorded a volume of 487,176 units, surpassing the forecast of the
Malaysian Automobile Association (MAA) at only 460,000 units. However, this was still a
marginal contraction of 0.7% compared to actual sales of 490,768 units in 2006.
In terms of segmentation, the performance of passenger cars, a category relevant to the
PROTON Group, fared much better during the year under review. MAA recorded total sales
of passenger cars of 379,639 units in 2007 compared to 365,422 units the previous year,
marking a year-on-year increase of 3.9%. Modest as this may seem, any growth in a market
of this nature is a cause for celebration.
Complementing this growth, sales of passenger cars were up a noteworthy 25% from
January to June 2008 compared to the previous corresponding period, while total industry
volume during the same period jumped by over 24%.
042 PROTON 2008 Annual Report
• chairman’s statement
Primary factors that contributed to the resurgence in the industry
include new vehicle models launched, the stabilisation of duty
structures, the firming up of the price of second-hand vehicles, greater
availability of loans for car purchase as well as the increase in salary for
civil servants in 2007.
Improved conditions for the nation’s automotive industry had a positive
impact on PROTON’s financial performance. The Group capitalised on
this uptrend with the timely launching of the Persona in August 2007
and the Saga in January 2008.
Moving forward, MAA has forecast an increase in total industry volume
(TIV) to 510,000 units in 2008 or 4.7% over 2007. That said, the
Group is not oblivious to the impact of the removal of fuel subsidies on
the industry. On this premise, PROTON will continue to be aggressive
in its sales and marketing strategies while offering products that cater
to the needs of today’s consumers.
Improvement in TIV: Passenger Car Segment
Note: Passenger Vehicle industry reclassified in January 2007 and includes all passenger
carrying vehicles i.e Passenger Cars, 4WDs/SUVs, Window Vans and MPV models.
Source : MAA
2003 2004 2005 2006 2007 2008
600
500
400
300
200
100
0
330
76
384
103
404
148
365
125
380
108
463
406
487
552
490 488510
47Thou
sand
s Passenger Car
CV, 4WD/SUV, Windows Vans, MPV
Passenger Vehicle
Commercial Vehicle
Total Industry Volume (TIV)
Financial PerformanceThe improved market conditions during the year under review, coupled
with PROTON’s strategic commitment to become a more resilient
and efficient national automotive company, has resulted in a healthier
financial performance for the Group.
For the financial year ended 31 March 2008, the Group successfully
recorded a profit after tax of RM185 million on the back of an improved
revenue of RM5.6 billion. This marks a significant turnaround to
profitability after tax compared with a loss after tax of RM590 million in
the previous year on the back of revenue of RM4.7 billion.
The Group’s cash and cash equivalents as at 31 March 2008 have also
improved significantly to RM1.17 billion. This is after taking into account
research and development (R&D) expenditure undertaken during the
financial year, expenditure for product refreshers due later this year,
and the new PROTON MPV (multi-purpose vehicle) currently under
development.
The year’s financial performance is attributable to improved sales
volume, which increased by 27% over last year, mainly due to the
introduction and sustained popularity of the Persona and Saga. The
higher sales volume translated to an increase in revenue of 19% year-
on-year. This higher demand for the Persona and Saga also generated
a better product mix for the Group resulting in higher margins.
In addition, the financial performance was also augmented by the
significant increase in other operating income, including a Government
grant in recognition of PROTON’s investments in R&D amounting to
RM194 million.
043PROTON 2008 Annual Report
• chairman’s statement
-
1,000.0
2,000.0
3,000.0
4,000.0
5,000.0
6,000.0
7,000.0
8,000.0
5,494.8
7,052.0
1,431.3
6,441.0
1,355.9
3,162.3
1,525.0
4,131.9
1,489.7
866.4
RM'm
illio
n
Domestic
Export
2003/04 2004/05 2005/06 2006/07 2007/08
Revenue Export
This R&D grant is part of the 4th Measure of the National Automotive
Policy (NAP) that seeks to encourage R&D activities within Malaysia,
specifically among Malaysian-based automotive manufacturers. It is
available to any automotive company or component manufacturer that
meets its qualifying criteria.
PROTON, as a national automotive company and a firm believer of
investing for the future, has over the years invested substantial amounts
into R&D and associated activities. In the recently concluded financial
year alone, PROTON incurred over RM500 million in R&D projects,
bringing the total investment in R&D to more than RM3 billion.
Hence, this R&D grant from the Malaysian government is not only
a recognition of the Group’s commitment to R&D but also an
encouragement for PROTON to continue to advance R&D efforts in
meeting the objectives of the NAP and the nation’s industrialisation
agenda.
In addition to the R&D grant, the year under review also saw the
Group gaining the benefits of its revenue diversification programme.
This includes the income from sale of rights for use of its intellectual
property in its export markets, in particular, the Group’s business
arrangement with China-based Jinhua Youngman Group, amounting
to RM33 million.
This commitment to R&D has enabled PROTON to develop the
necessary capabilities to enable it to design, develop, engineer
and manufacture its own cars. More importantly, as these cars are
developed indigenously, PROTON retains the right to any intellectual
property thereto. These can then be further monetised through various
licensing arrangements.
As PROTON moves forward and increases its catalogue of intellectual
properties, the licensing of such assets to third parties will become
more commonplace, thereby further enhancing the Group’s
revenue base.
Shipment of the first batch of the 30,000 PROTON Gen.2 units to China
DividendsIn view of the need to ensure that PROTON is viably strengthened
and able to achieve long-term and sustainable growth, the Board of
Directors are not recommending the declaration of any dividends for
the financial year ended 31 March 2008. With improved profitability in
the future, the Board expects to once again be able to recommend a
suitable dividend payment.
044 PROTON 2008 Annual Report
• chairman’s statement
Corporate DevelopmentsPROTON has stayed the course with its drive towards positive change.
In its quest to become an efficient national carmaker, PROTON has
and will continue to embrace change, where change is required. The
Group’s commitment is reflected not only in the improvements made
in its products and services but also in the continued enhancement of
the way PROTON operates its business.
In this respect, PROTON has during the course of the year under
review, carried out various strategic and tactical initiatives aimed at
strengthening the foundation for future growth.
Launch of New Products The engine of growth for any car manufacturer lies in its products.
PROTON’s single-minded approach to renew its product line-up to meet
the evolving needs and requirements of the buying public resulted in
the roll-out of the Persona and subsequently the iconic Saga during the
year under review.
Having invested much time and effort in the three years that are
typically required to conceive and develop new models, PROTON is
indeed pleased to note that the response to date from car owners has
been extremely positive, to say the least.
DYMM Seri Paduka Baginda Yang di-Pertuan Agong and the DYMM Raja Permaisuri Agong getting a feel of the Persona at the launch
045PROTON 2008 Annual Report
• chairman’s statement
The Persona is the first to embody PROTON’s philosophy of
manufacturing ‘the right car for the right market at the right time for
the right price’. The Persona has received over 50,000 in bookings as
at end July 2008.
The Persona was followed by the unveiling of the new Saga, the
car that remains the embodiment of Malaysia’s aspirations to be an
internationally competitive auto manufacturer. The experience and
lessons PROTON has garnered over the years have been embedded
into this new model. This has translated into bookings of almost
70,000 units within six months since its launch. It is currently the
fastest-selling model in PROTON’s history. Both the Persona and Saga
are also expected to contribute significantly to PROTON’s export sales
in the very near future.
Within the PROTON Group, Lotus Group International Limited (“Lotus”)
has also unveiled a brand new thoroughbred that is set to take the
world of performance cars by storm. The Lotus Evora is the first new
Lotus model to be launched in over 13 years. Entering the market
above the Elise, Exige and Europa, this new Lotus will be available in the
first half of 2009 and is expected to contribute positively to the
Lotus Group.
The launch of the new Saga by the Rt. Hon. Prime Minister of Malaysia
The launch of Lotus Evora at
the British Motor Show
046 PROTON 2008 Annual Report
• chairman’s statement
Broadening ExportsThe export market will be key to PROTON’s continued long-term success
as a relevant and credible auto manufacturer. Given the relatively small
domestic market and saturated motorisation rate, it is a given that
PROTON must look towards exports for tangible long-term growth. On
this score, the Group will continue to be focused on the high-growth
markets of ASEAN, China, and India, while tapping opportunities in
various emerging markets such as Iran, Russia and Vietnam.
During the period under review, PROTON began to make further in-
roads within the highly competitive ASEAN automotive market by
launching the brand in Thailand. Initial indications are that Thailand,
despite being an open and competitive market, holds a lot of potential
for PROTON. PROTON is confident that the company’s entry into
the Thai automotive market will generate long-term positive results.
Indonesia also witnessed the launch of additional PROTON models
served by an increasing sales and service network.
PROTON has also managed to enter the highly competitive but fast
expanding Chinese automotive market during the period. Its Chinese
business associate launched the Gen.2, re-badged as the Europestar,
in January 2008.
Development of New ProductsContinuing with the strategy of providing the market with a range of
quality products in line with its needs, PROTON is set to unveil its
first MPV by March 2009. Once completed, it will allow PROTON to
showcase its ability to produce a vehicle that not only has high quality
and safety standards, but is also able to cater to modern lifestyle
demands, especially for the contemporary families of today.
PROTON launch in Thailand at the Bangkok Auto Show, part of its thrust into regional markets
A fleet of PROTON taxis ready for export to Iran
The Persona launch in Jakarta, Indonesia
047PROTON 2008 Annual Report
• chairman’s statement
Rationalisation of the Vendor NetworkThe success of PROTON’s Persona and Saga is partly attributable to the
improvements within the vendor community and their commitment
to change and move forward with PROTON. On behalf of PROTON,
I would like to commend the vendor community for their efforts
and perseverance over the last few years. It is encouraging to note
that the vendor rationalisation programme initiated in 2006 is
progressing well.
The rationalisation and strengthening of the vendor network will
continue to be a major thrust going forward. This particular thrust is
critical as it is directly correlated with PROTON’s strategic objective
of maintaining the cost-competitiveness of its operations, as well as
improving the overall quality of its finished products.
Rationalisation of the Dealer NetworkPROTON’s improvement during the financial year can also be traced
back to the efforts of the dealer community. Their tireless efforts to
broaden the appeal of the brand among the public helped make the
Persona and Saga extremely popular.
Strengthening of Managerial ResourcesAs PROTON progresses, its human capital requirements, particularly
at the managerial level, will also evolve accordingly. Given this, during
the period under review, PROTON took the conscious step to
strengthen its managerial resources, particularly those that are core to
the Group’s operations.
The Group foresees that this strengthening will be an on-going process,
with emphasis on enhancing the talent pool of critical functions both
from local and international sources. PROTON firmly believes that the
steps taken to strengthen the managerial resources is a prudent long-
term investment for the Group.
PROTON is now carefully studying its options with respect to the India,
Russia and Vietnam markets, which have the potential of being strong
export markets for PROTON. However, given the complexities of these
markets, PROTON will adopt a cautious approach before committing
significant resources to these markets.
PROTON is also cognisant that its ability to make further in-roads
abroad is hinged on the Group’s ability to deliver value-for-money
products that are of acceptable quality. Brand equity can only be
built if the products are able to consistently meet international
quality standards and customers’ expectations. On this score, PROTON
will continue to strive for manufacturing excellence and continuous
quality improvements.
The dealer rationalisation programme played a significant role in
breathing new impetus among the dealer community by ensuring they
are financially more resilient and operationally more flexible.
However, there is room for further improvement. Moving forward,
PROTON would like to see the dealer community significantly improve
its service levels to rival that of other more established brands. PROTON
firmly believes that improvement of the level of service among dealers
can help strengthen the brand image of PROTON in the long run.
Strategic Initiatives Moving Forward PROTON’s positive financial performance for the year ended 31 March
2008 is a clear reflection of the power of perseverance, as well as
the need to continuously change, refocus one’s priorities and adapt to
changing situations.
As the Group progresses deeper into the new financial year,
PROTON aims to maintain its forward momentum by zeroing in on
continuous enhancements in selected critical areas that are in line with its
overall strategy.
048 PROTON 2008 Annual Report
• chairman’s statement
Products Catering to Demand
In the company’s Annual Report for the financial year ended 31 March
2006, PROTON had articulated its philosophy of producing ‘the right
car for the right market at the right price and at the right time’. It is
encouraging to note that this philosophy is slowly but surely,
becoming entrenched in the culture of the company. This philosophy
was instrumental in the development of the Persona and Saga. Going
forward, PROTON will continue to ensure future products continue to
adhere to this philosophy.
By focusing on delivering products that offer value to consumers, be
it in terms of quality, cost, features or customer service, PROTON will
position itself as a brand that meets the needs of consumers during
these times, when only the strong and agile will remain relevant. As
such, the key thrust for the coming financial year will be to continue to
introduce new products along the lines of PROTON’s adopted product
philosophy.
There is also now significant demand for cars that are fuel efficient
to compensate for the rising price of petrol. Given this development,
PROTON is focussing efforts to ensure its future products can meet, if
not surpass this expectation. In the meantime, PROTON will introduce
Natural Gas Vehicles (NGVs) variants based on the existing product
line-up. The Group is keen to meet the needs of a market that has
been impacted by the soaring fuel price given that PROTON NGVs can
provide a cost effective and environmentally-friendlier alternative.
PROTON will also continue to explore and cooperate with technology
providers to develop other alternative fuel vehicles that can enable it to
produce fuel-efficient products.
On the same note, the Group is indeed excited about the Government’s
call for PROTON to explore standardising taxis throughout the country.
Under the plan mooted by the Malaysian Government, existing taxis
comprising different makes and models will gradually be phased out
and replaced with a standard model that would also be fitted with
a fuel-saving device as well as the NGV option. PROTON is currently
studying this request further given the extensive R&D required to design
and produce these taxis.
Sales Volume: Increasing
Q1 Q2 Q3 Q4 Q1
2828
28
1619 23
343229
23
5
6
5
55
42
734
21
24
Q2 Q3 Q4
33 36
39
0
10
5
15
25
20
30
40
35
45
2006/2007 2007/2008
ExportDOM
Thou
sand
s
Crash test facilities at PROTON are used to improve product safety
049PROTON 2008 Annual Report
• chairman’s statement
Emphasis on Product SafetyThe Persona and Saga are clear indications that PROTON continues
to emphasise safety. Airbags, Anti-Lock Braking Systems (ABS) and
Electronic Brake Distribution (EBD) are now features that are available
in PROTON’s product line-up. Our current products also meet the
NCAP 3 safety rating.
As an automaker that places emphasis on safety, PROTON supports
any move to improve product safety. Hence, PROTON welcomes the
Government’s initiative to mandate the usage of rear seatbelts. For its
part, PROTON has committed to retrofit rear seatbealts in all its older
cars for free.
Moving forward, these items will be made standard features. PROTON
intends to incorporate side and curtain airbags as standard items by
2012 as an added safety measure. PROTON also intends to ensure that
all its products meet the NCAP 4 safety rating in the near future.
Continuous Improvement in Product QualityThe quality of PROTON’s current product range has improved
significantly since the company first made its commitment to improve
product quality. However, PROTON believes that there remains room
Efficient Cost ManagementGiven the challenges faced by car manufacturers today, particularly the
rising cost of doing business, it has become all the more important that
the Group concentrates on efficient cost management while remaining
steadfast in its management of vendors to ensure efficient and effective
procurement initiatives. PROTON will examine all elements of its cost
structure in order for the Group to operate effectively and efficiently.
Through this planned, timely and integrated approach, PROTON will
stay its course towards improving itself. However, it must be noted
that for the Group to move forward, there must be a quantum leap in
improvement and not just an incremental approach. PROTON and GIATMARA come together for the advancement of automotive training
Tan Sri Dato’ Haji Muhyiddin Bin Mohd Yassin, Minister of International Trade and Industry, during his visit to the Shah Alam plant
for improvement and has set an internal target of product quality that
is at least comparable to the other popular brands within the same
class and segment. This particular thrust will take some time, but
incremental results can already be seen in the current product range.
In due course, PROTON firmly believes that it will be able to match if
not surpass the level of quality of comparative products being offered
by its competitors.
050 PROTON 2008 Annual Report
• chairman’s statement
Collaborations
The fast-changing global automotive landscape demands that players
collaborate to gain further economies of scale and hasten the speed of
development. Those that choose to remain independent must have the
reach, resources and scale to secure growth. Alternatively, participants
can choose to build multiple mutually beneficial alliances.
PROTON as a company fully realises that it needs to keep up with
industry changes to meet the challenges of the present and the future;
in the areas of what it does, how it does it and where it does it. It
is recognised that although PROTON can substantially proceed on its
own, the company can utilise its limited resources more efficiently
via collaborations and alliances. Collaborations and alliances can help
PROTON achieve the desired end-state in a faster, more cost-effective
and more efficient manner.
In view of this realisation, PROTON has opted to adopt mutually
beneficial collaborations that are specific to its strategic and operational
needs, be it from a product perspective or for the purpose of
market entry. The period under review witnessed the use of
collaborations to facilitate PROTON’s entry into the Chinese and Thai
automotive markets. These relationships have allowed PROTON to
tap into the infrastructural strengths of the partners with PROTON
reciprocating with products, technology and know-how.
Although both these collaborations are still in their infancy, it has
provided PROTON with valuable insight that will be useful in the future.
Given this, PROTON will continue to pursue this strategy of multiple
collaborations for specific needs and purposes going forward.
ProspectsPROTON’s results for this financial calendar are clear indications that the
Group has progressed and is moving in the right direction. Nonetheless,
the road ahead is still fraught with a multitude of challenges, even more
so now, than ever. The effects of the significant fuel hike in June 2008
have yet to fully manifest itself throughout the economy. However,
with the rising cost of living impacting the buying public’s disposable
income, the Group expects the resurgence of the local automotive
sector to experience a slight dampening in the short term.
PROTON is a strong brand domestically, that we have continued
to nurture. PROTON will build on its strength and look outward for
continued growth. There are tangible and significant “low hanging
fruits” in selected regions, where PROTON can leverage on its skills-set,
expertise and experience to make further in-roads that will positively
impact top-line and bottom-line growth for the Group.
In this respect, the Group has identified key thrusts to succeed globally,
which include focusing on high-growth regional markets, moving
towards market-driven product development for these markets, while
striving to achieve economies of scale.
With the planned and integrated strategies in place and with
well–timed execution of these plans, PROTON firmly believes this will
enhance long–term shareholder value.
051PROTON 2008 Annual Report
AcknowledgementOn behalf of the Board of Directors, I wish to convey our sincere
appreciation to PROTON’s Management, staff and employees, at all
levels and across the various functions, both domestic and
international.
The Board is indeed appreciative of the perseverance and dedication
shown by the PROTON fraternity throughout the challenging period
of the last few years. It is my hope that all those connected with
PROTON will continue to work as one, to ensure the Group’s
continued success, as it moves forward.
My sincerest appreciation also goes out to our Board of Directors
for their vision and commitment to guide PROTON in achieving its
strategic objectives. On behalf of the PROTON Group, I would like to
convey my sincerest appreciation to Dato’ Mohd Izzaddin Bin Idris,
Dato’ Ahmad Bin Haji Hashim and En Mohammad Zainal Bin Shaari
who have resigned from the Board, for their services and contribution
to the Group over the years. We are also pleased to welcome Datuk
Zalekha Binti Hassan as the newest member of the Board.
As always, we are grateful for the support shown by our partners –
PROTON’s vendors and suppliers as well as our distribution and
sales teams.
To our ever-growing customer base, we would like to express our
deepest appreciation to all customers who have supported our
products and entrusted us with their confidence. We are determined
to close the gap in product and service quality to become a brand
any car owner will truly be proud of.
PROTON Group and the automotive industry could not have
progressed over this last year if not for the guidance and
determination of the Rt. Hon. Prime Minister, YAB Dato’ Seri
Abdullah Haji Ahmad Badawi and the Malaysian Government
through its various ministries and agencies. The success PROTON
has attained is also the result of the energy and drive of this major
stakeholder. Our utmost gratitude and sincerest appreciation to YAB
Dato’ Seri and the Government.
And most certainly our shareholders deserve much praise for
continuing to remain with us throughout the challenges and
difficulties encountered. I thank you for this support and we would
like to assure everyone that we will continue to strive ahead to
enhance shareholder value for the long term.
Thank you.
Dato’ Mohammed Azlan Bin Hashim
Chairman
• chairman’s statement
From a holistic and realistic perspective, it will clearly take time,
significant effort and continued support from all stakeholders for
PROTON to achieve what it has set out to accomplish. The task is not
insurmountable if everyone in PROTON, from the Board to Management
to our employees, along with the support of the vendor community
and dealers work together to take the Group to greater heights.
052 PROTON 2008 Annual Report
053PROTON 2008 Annual Report
“ Our customers
define who we are
and what we evolve
into. ”
PROTON’s Managing
Director flanked by
loyal customers
during Customer
Day at the PROTON
Centre of Excellence.
054 PROTON 2008 Annual Report
• managing director’s review
Dato’ Haji Syed Zainal Abidin B Syed Mohamed Tahir
Managing Director
055PROTON 2008 Annual Report
• managing director’s review
“ In essence, PROTON aspires to become a regionally competitive
automotive company, creating value by earning customers’ trust through
the quality and innovation of our products and people. ”
OverviewOur improved performance for the year under review was the result of us achieving our
short-term objectives and targets, which are themselves stepping stones towards reaching
our long-term goals.
As highlighted in the previous annual report, PROTON’s focus for our 2008 financial year
would be in the core areas of product, quality, cost efficiency and distribution network. We
have been consistent in this strategy during the year under review and this has reaped
positive results for the Group.
It is vital that all levels of the Group are committed to working hand-in-hand to further
enhance our operations, processes, value and quality to enable PROTON to make greater
strides, and thereby grow from strength to strength in the years to come.
As I review the previous financial year, PROTON has demonstrated to its stakeholders
its ability to transform into a viable and profitable automotive company in spite of our
numerous challenges. To ensure that we are able to sustain the improved results, we must
stay focused in our pursuit of global standards of excellence in all areas of our business.
While we have indeed achieved notable progress, there is still plenty of room for
improvement as PROTON intends to become a world-class car manufacturer. To enable
this vision to become a reality, we will continue to drive initiatives that will enhance the
quality of our products and services domestically and regionally.
056 PROTON 2008 Annual Report
ProductThe importance of ensuring we have a strong product portfolio is all the
more crucial as it has a pivotal impact on our turnaround plans. This is
reinforced by our winning strategy of introducing ‘the right car, for the
right market, at the right price and at the right time’.
This strategy was reflected in our newly introduced Persona and Saga
models, with the latter powered by the new CamPro IAFM engine
during the year under review and suffice to note, these two models are
performing tremendously well in the market to date.
Furthermore, we have continued to update and refresh our existing
product lines to entice and attract customers. The re-energised
Waja and Gen.2, with their new look and powerful CamPro CPS
engine, and the economical Savvy re-designed to give better value
• managing director’s review
proposition to the buyers of the Savvy Lite, have successfully managed
to excite car consumers in Malaysia during the year under review.
Staying on course, PROTON will be launching our first MPV in
early 2009, further solidifying our product line-up to include a high
quality multi-purpose vehicle that can cater to the family-oriented
contemporary lifestyle. Other exciting offerings are also in the pipeline
with replacements for the Waja and iconic Perdana on the drawing board.
To sustain this positive momentum, we will continue our research and
development (R&D) efforts and comprehensive market surveys to
gain a deeper understanding of the needs of our customer base. By
harnessing the right technology and keeping our finger on the pulse of
customers’ requirements, we truly believe that this will bring us closer
to achieving our goals of a dynamic product portfolio.
The Managing Director inspecting
the production line during the
Quality Campaign
057PROTON 2008 Annual Report
QualityAs always, quality control remains a focus area for PROTON in every
stage from design and production to sales, distribution and after-sales
service and throughout the whole value chain from our vendors to
our dealers. We remain committed to ensuring that our products and
services meet global standards and exceed customer expectations.
Over the years, there have been noticeable and meaningful
improvements in the quality of our vehicles as evidenced by the
reduction in customer concerns. When the Savvy was launched in
2005, there were 1.28 concerns per car for the first three months from
the start of production. However, the number of concerns per car had
significantly reduced to 0.49 when we introduced the Saga in 2008.
This clearly shows that the various strategies and initiatives we have put
in place, from the introduction of a new Warranty Policy (which was last
updated in 1993), Customer Delivery Policy, Voice of Customer (VOC)
feedback to raising Pre-Delivery Inspection standards to manufacturer’s
requirements, implementation of the Quality Improvement Committee
framework and our emphasis on prevention rather than detection,
among others, are coming to fruition.
• managing director’s review
We have also made it a priority to deliver excellent after-sales service
as it has been proven to have a huge impact on our long-term brand
equity. The PROTON i.CARE customer service programme is an
extension of our promise to customers that they can rely on quality in
every aspect of our business.
We strongly believe that the customer’s experience with PROTON does
not end with the customer driving our product out of the showroom. By
ensuring that our customers have a great experience throughout their
usage of our products, we are able to build PROTON’s brand equity in
such a way that we can scale-up when satisfied customers return to
purchase more of our products.
Our product quality is also dependent on our partners. Hence, in
February 2008, PROTON and the National Productivity Corporation
(NPC), now Malaysian Productivity Corporation (MPC), signed a
Memorandum of Understanding (MOU) to collaborate in managing
vendor development. The MOU is a crucial development to enhance
the nation’s automotive eco-system.
The Managing Director inspecting
the production line during the
Quality Campaign
Signing ceremony between PROTON and NPC to enhance
management of vendor development
058 PROTON 2008 Annual Report
• managing director’s review
Distribution NetworkAs a pro-active measure we have carried out a sales network
consolidation exercise with the primary purpose of reinforcing our sales
distribution network and creating value for worthy distributors.
During the year under review, we reduced our number of outlets by
24% to 302 outlets compared with 397 outlets a year ago. We plan
to continue with this exercise in the current financial year as we aim to
reduce our total outlets to 250.
Cost EfficiencyTowards this end, the year under review saw PROTON making tangible
and significant headway in increasing component standardisation and
carryover between its models. By value, the Persona/Gen.2 carryover
is about 75%, whilst the Saga/Savvy carryover is approximately 40%.
Moving forward, we expect to continue this best practice in the
development of future models.
With more and more of our products sharing similar parts, we would
be able to build synergies within our manufacturing processes that
improve quality management while consolidating inventory levels via
Overall, our efforts towards quality improvement have resulted in
PROTON being recognised as the most improved automotive company
in the J.D. Power Asia Pacific 2007 Malaysia Customer Satisfaction Index
(CSI) Study released end July 2007. This recognition will undoubtedly
galvanise the Group to leverage on our success thus far to strive
towards building an automotive brand that is known globally for its
reliability and quality.
a more efficient procurement process. At the end, we are able to price
our cars competitively to capture a larger market share.
This strategy has been employed by leading car manufacturers the
world over and it has been one of the core focuses of the PROTON
Group over the last few years.
Given the positive strides we have made to date, we are confident
that our goal to strengthen commonality will have significant benefits
in terms of cost reduction and improvement in operational efficiency,
thus, positioning us as a viable automaker in the region.
The Managing Director addressing the team on the Business Turnaround Plan Kick-Start Programme
059PROTON 2008 Annual Report
• managing director’s review
Vendor BaseApart from strengthening our dealership network, we invested an
equal amount of energy and time into strengthening our vendor
base through rationalisation, tiering and consolidation exercises. Our
initiatives saw a decrease in the number of our direct vendors from
260 in the 2006 financial year to 200 in the year under review which
represents a reduction of 23%. What this effectively means is that
PROTON now has a stronger, more structured and manageable direct
vendor network which is ably supported by a second tier network by
virtue of the tiering system.
PROTON is clearly committed to enhancing efficiencies within our
distribution network. In tandem with our rationalisation exercise, we
have introduced a culture of meritocracy amongst our distributors.
Only the performers will be rewarded. We are pleased to note that
this strategy is yielding positive results as the average monthly sales for
each outlet has risen by almost fifty percent from the fourth quarter of
2007 against the corresponding quarter in 2008.
We are fully aware that our vendors are key partners as they play a key
role in ensuring the continued success of PROTON. To this end, we
increased vendor participation in the various aspects of production of
PROTON cars such as design, quality and cost management, which was
further supplemented with training.
Signing ceremony for distributorship
agreement in Bangkok
The Managing Director receiving the ‘Best Model of the Year’ award for the
Persona from Frost & Sullivan
060 PROTON 2008 Annual Report
• managing director’s review
Moving ForwardHaving achieved an improved performance during the period under
review, this has set the pace for us to create the momentum to achieve
tangible results. We are aware that we are facing a period of uncertainty
which is plagued by external factors and internal considerations. We are
also confident that we will rise to the occasion as we have over the last
couple of years.
With our plans in place, it is only a matter of execution. We have
committed ourselves to delivering meaningful results in the areas of
product refreshment and technology advancement under the area
of engineering.
In the domestic market, we will continue to build market share.
On-going enhancements and consolidation of our dealer networks will
also be fundamental in achieving this thrust, while customers can look
forward to exciting marketing campaigns for the Saga, Persona, Neo
and Waja models.
Directing our attention to the international arena, we will intensify
our export programme and improve logistics. Diversifying our market
segments is particularly crucial to ensure we are not solely reliant on the
domestic market. On this note, we will be launching new programmes
regionally, specifically in ASEAN, China, India and the Middle East.
In essence, we aim to design value-for-money cars that meet target
market needs through smart partnerships with local partners in the
respective target markets.
PROTON will also move towards market-driven product development
and adopt a high value proposition strategy by making ‘the right car for
the right market at the right time and price’.
Towards achieving economies of scale, PROTON will maximise
localisation to reduce cost and, where a certain level of scale is achieved
and commercially viable, there is potential for production hubs to be
established in the respective targeted high-growth markets, translating
to cost competitiveness and complementation of key components.
The new Saga is flagged-off
The Managing Director at the launch of the face-lift Gen.2
061PROTON 2008 Annual Report
• managing director’s review
In essence, PROTON aspires to become a regionally competitive
automotive company, creating value by earning customers’ trust
through the quality and innovation of our products and people.
We will:
• move towards a customer-focused, value-for-money product
development approach;
• customise marketing and distribution by working with local
companies;
• collaborate to build economies of scale for cost efficiencies;
• seek partners for joint development and acquisition of technology;
and
• invest in people to build a culture of performance, innovation
and teamwork.
We will also strive for manufacturing excellence and continuous
quality improvements with the implementation of various processes
and initiatives such as QIT, ICC and Kaizen. Last but not least, we will
continue our cost reduction initiatives and vendor rationalisation plans
to become a more dynamic and competitive car manufacturer.
Dato’ Haji Syed Zainal Abidin B Syed Mohamed Tahir
Managing Director
On the whole, PROTON will leave no stone unturned in our vision to
strengthen our brand equity within the local and regional arena. With
our expanded product range, improved quality and value-for-money
product positioning, we are confident that PROTON will continue to
capture the hearts and imagination of our customers.
Towards this end, I present to you our Operations Review that
showcases the core components that form the brand.
Thank you.
PROTON continues to support the advancement of A1 in Malaysia
062 PROTON 2008 Annual Report
Engineering Services
• operations review
In the year under review, the Group’s engineering capabilities remained the core focus point
for continuous improvement in line with our thrust to become a world-class and regionally
competitive automotive company.
In addition to developing new models and enhancing our existing product line-up to
cater to the needs of the market, our engineering abilities were geared towards technology
advancement via consistent and progressive research and development as well as technical
enhancement.
063PROTON 2008 Annual Report
Product DevelopmentWith robust product planning, we were able to introduce both new
and improved PROTON cars in the year under review, marked by the
successful launch of the Persona in August 2007, followed closely by
the unveiling of the new Saga in January 2008.
Saga
The Saga is currently the longest-surviving and most popular model
introduced by the Group to date, which is why, the development
of the brand new Saga was such a landmark project for the
PROTON family.
Our enthusiasm was clearly reflected in the fact that this
project was completed in a record-breaking 17 months from
conceptualisation to manufacturing, thus achieving, if not, surpassing
all our targets. Equally important, is how we managed to surpass our
customers’ expectations, as evidenced by the overwhelming response
in sales since the car was launched.
Given that a significant amount of planning and effort were invested
in the new Saga’s development, we are pleased that this model has
turned out to be the biggest seller in PROTON’s history to date.
Persona
The Persona was launched amidst challenging market conditions
that improved progressively. While the model is based on a Gen.2
platform, it is important to note that the car was designed to be more
family-oriented than the sportier Gen.2, while at the same time,
retaining a stylish and contemporary appearance. With a brand new
look for its rear, the Persona also features a fresh new interior design
that incorporates learnings from the earlier Gen.2.
• operations review
The Persona
The new Saga
064 PROTON 2008 Annual Report
Waja
With the view to position the Waja as a premium model compared
to the Persona and Gen.2, the upgraded Waja CPS was unveiled in
March 2008. The latest enhancements to the recently face-lifted Waja
include the powerful CamPro CPS powertrain as well as technologically
advanced bi-xenon headlights, auto door locks and remote trunk
release as standard features.
Combined with other plush items such as leather seats and gated
gear shifter, the re-energised Waja now offers more value than ever
to strengthen its leading position among new competitors from Japan,
Korea and Europe.
Product Refreshments
Gen.2 The face-lift of Gen.2 was done in tandem with the initiation of the
Persona project to take advantage of cost sharing given that both
projects share similarities in terms of their interior design.
As a result of the exterior face-lift, the Gen.2 now features a new
bumper, body kit, colour and alloy rims. We also upgraded parts of
the exterior and interior of the car based on customers’ feedback while
introducing the much-anticipated CamPro CPS powertrain.
The engine’s Variable Intake Manifold (VIM) switch alternates between
a long intake manifold at low engine speeds and a short intake manifold
at higher engine speeds. PROTON is applying a longer intake manifold
to achieve slower air flow, as this system has been found to promote
better mixing of fuel. The short intake manifold will allow more air to
enter faster and be especially beneficial to engines at high Revolutions
Per Minute (RPMs).
• operations review
With extra power, better handling and improved quality, the refreshed
Gen.2 is set to become a highly competitive model in the sporty
C-segment automotive category.
The revitalised Gen.2
The upgraded Waja
065PROTON 2008 Annual Report
PROTON Virtual Reality (VR) Centre
The PROTON VR Centre is a state-of-the-art visualisation facility built
for the R&D team, in the styling visualisation, engineering design and
engineering analysis (CAE), as well as our technology partners with
access to a three dimensional or virtual environment.
The VR Centre enables collaborative design reviews with an
interactive presentation platform amongst our design, engineering and
management teams. Ultimately this is where we explore in-depth and
Research and Development (R&D)
• operations review
‘walk through’ the entire conceptual and technical designs without
having to produce actual-sized models.
PROTON’s state-of-the-art styling studio
The launch of the VR Centre
066 PROTON 2008 Annual Report
Functions of the VR Centre include:
• providing a collaborative work environment between users from
different fields of expertise;
• enabling video conferencing between PROTON and our technology
partners to review design and discuss engineering dynamics;
• providing a platform for high-level management presentations
and forums;
• operations review
• enhancing quality control between peers and managers as the
Centre is able to undertake digital mock-up, finite dimensional and
tolerance sessions; and
• providing a platform as a training centre and knowledge-sharing
facility.
The VR Centre was launched on 15 August 2007 by Seri Paduka Baginda
Yang di-Pertuan Agong, Al-Wathiqu Billah Tuanku Mizan Zainal Abidin
Ibni Al-Marhum Sultan Mahmud Al-Muktafi Billah Shah.
Ian Maxwell (left)
General Manager Lotus Engineering Malaysia
“ The dynamic environment is rapidly changing
and PROTON is an exciting place to be in at the
moment. The potential for PROTON and Lotus to
go global is simply incredible! ”
Robert L. Hall
Special Projects in Managing Director’s Office
“ I’ve been working with PROTON for four years
and it is one of the most interesting and exciting
places I’ve ever worked in. The current Management
is impressive as it knows exactly what needs to
be done. The local guys that I work with are great,
comfortable with sharing knowledge and are the
best product people I’ve met in my life. ”
067PROTON 2008 Annual Report
Revenue Generation via R&D
During the year under review, we optimised the use of our R&D facilities
by offering our services and expertise to external clients as a means to
generate revenue for the Engineering Division.
The R&D facilities include:
• Component, Material, Safety and Strength-test (CMSS)
laboratory;
• Emission laboratory, which conducts exhaust emissions tests such
as emission Type I~III, cold Test (-70C) and fuel consumption test;
• operations review
• Complete Vehicle Testing (CVT), which conducts tests on completed
vehicles such as gearbox performance, low fuel handling, brakes
and noise levels;
• Prototype Shop, which develops various parts, components and
precision moulding tools;
• Test Track Rental, which has been utilised by various automotive
manufacturers for their vehicle validation.
“ As a Malaysian I’m proud to support
Malaysian-made cars. PROTON cars are stylish,
comfortable and affordable. ”Al-Zulfadly
Waja and Saga owner
PROTON’s Component, Material, Safety and Strength (CMSS) laboratory
A vehicle undergoing a crash test
068 PROTON 2008 Annual Report
• operations review
Research Projects
Compressed Natural Gas Direct Injection (CNG DI)
The CNG DI project was the multi-institutional collaboration between
PROTON, PETRONAS and selected local universities.
The CNG DI system is a monofuel direct injection system that runs on
compressed natural gas or CNG utilising a direct injection method into
the combustion chamber at relatively high pressure. This fuel system is
controlled by an electronic controller unit (ECU) that can synchronise
and time fuel injection accurately into the engine cylinder, depending
on the requirements of power and speed.
The system enables a car to be driven by using only natural gas.
Additionally, the use of direct injection technology will ensure that
power and performance are equivalent to a similar car using petrol.
069PROTON 2008 Annual Report
Technical EnhancementIn order to retain our competitive edge in terms of skills-set and technical
know-how in this industry, at PROTON we are committed to ensuring
that our human capital is continuously nurtured with the right training
and tools.
The year under review saw a total of 51 engineers from Vehicle
Engineering and Production Engineering being sent to Korea, for
a joint development initiative for a multi-purpose vehicle (MPV).
• operations review
This working and training initiative had resulted in:
• A 40% engineering involvement in terms of styling, engineering
design & engineering analysis for our team on the MPV;
• Significant knowledge, skills upgrading and technology transfer;
• Reducing development lead time for PROTON’s MPV;
• Reducing tooling modification due to design via lesson learnt input;
• Producing a design guide line and design check list by each
engineer for future projects.
This training programme resulted in the successful release of all designs
and 3D data within the allocated time frame and the development of
new MPV parts are currently in progress.
Universiti Putra Malaysia was appointed by the Ministry of Science,
Technology and Innovation as the ‘Lead Institution’ to manage the
project under the RM28.9 million IRPA Prioritised Research Scheme.
Other participating institutions were Universiti Kebangsaan Malaysia,
Universiti Malaya, Universiti Teknologi Malaysia, Universiti Teknologi
Mara and Universiti Teknologi Petronas.
PROTON’s Semi-High Speed Test Track in Shah Alam
Technical staff undergoing stringent training
070 PROTON 2008 Annual Report
• operations review
Manufacturing
Today, PROTON has one of the most integrated manufacturing facilities in the region,
comprising casting and foundry, machining, stamping, assembling and painting capabilities.
The Group aims to fully utilise these assets to propel the brand to greater heights. To
achieve this, we must strive for manufacturing excellence via continuous quality and process
improvements in our manufacturing plants. The year under review saw the successful
implementation of various manufacturing methods and best practices to enhance productivity
and quality levels. These efforts have indeed borne fruit for the Group to date.
PROTON’s production volume during the year under review was significantly higher due to
the introduction of the Persona in August 2007 and the new Saga in January 2008.
071PROTON 2008 Annual Report
• operations review
Total production volume during the year was recorded at 132,464
units representing an increase of 26% over the previous financial year.
Out of this, 66,935 units were produced by our plant at Shah Alam,
Selangor, while 55,160 units were produced in our facility at Tanjung
Malim, Perak. The remaining 10,369 units were produced in our
Medium Volume Factory (MVF), which is part of the Shah Alam plant.
In addition to the production of the two new models, our manufacturing
facilities were also utilised for the production of refreshed versions
of current models, namely the Savvy and Waja CPS during the year.
Meanwhile, production of the older models of Wira and Iswara were
discontinued in July 2007 and November 2007 respectively to make
way for new model introductions.
By the end of the year under review, total monthly production volume
reached an average of 13,000 units per month, with two of our main
plants in Shah Alam and Tanjung Malim running two shifts.
Delivery volume also increased to 134,117 units from 99,546
recorded a year ago. From this, 116,911 units were for the domestic
market. Higher sales achieved by Proton Edar during the year and the
adjustment in production volume planning have both contributed to a
better channel stock position of 13,262 units or just slightly above the
required one month stock during the year.
“ Working in PROTON gives me the opportunity
to work with car engines which has always been
my interest. ” Mohd Bukhary Zakaria
Engineering (Mounting)
072 PROTON 2008 Annual Report
• operations review
PROTON Shah AlamOur Shah Alam plant comprises both the main plant and the MVF. The
combined total installed capacity for both these plants is 200,000 units
per annum. In addition, the casting, engine and transmission plant,
which is also located within the Shah Alam facility, has the capacity to
produce 180,000 units of CamPro engines per year.
Since the launch of the new Saga in January 2008, the main plant has
been producing 6,000 units of this new model every month. Due to
the strong demand for the new Saga, steps have been taken to increase
the volume. The main plant set-up capacity has been redesigned to
produce more than 8,000 vehicles per month and we expect this to
be achieved by September 2008.
The main plant also produces the Perdana and Arena models in smaller
volume, as well as completely knocked-down parts and components
for the Iranian market.
The plant in Shah Alam achieved significant quality improvements in
conjunction with the introduction of the new Saga. Quality gates were
implemented on line to ensure defects are discovered and rectified
immediately. Comprehensive online training was also carried out and
our quality improvement teams are on-hand to ensure that high quality
levels are adhered to. Today, all vehicles produced in this plant are
required to have running tests on a special route to eliminate any
remaining quality issues.
Meanwhile, the MVF started the production of the new Waja CPS in
January 2008 with production volume around 1,300 units a month. In
the current financial year, the Waja CPS production will be transferred
to the main plant to make way for the new MPV.
Main building of the PROTON
plant in Shah Alam
073PROTON 2008 Annual Report
• operations review
PROTON Tanjung MalimPROTON Tanjung Malim is the latest and the most sophisticated
manufacturing and assembly plant within the PROTON Group.
It produces the Gen.2, Persona, Satria Neo and Savvy.
The plant operates on an Automatic Line Control (ALC) system to track
vehicles and broadcast real-time information to the nearby vendor
community for parts supply-delivery scheduling. This is to ensure
an efficient and effective logistics network can be run by third party
logistics service providers. The plant has a production capacity of
150,000 units per annum working on a two-shift basis.
The Persona was launched at a production volume of 4,000 units per
month. Given its popularity and demand for this model in the domestic
market, and coupled with plans to export the car overseas, the monthly
production volume for the Persona has been increased to 6,000 units
a month to date.
We expect the combined demand for the Persona and Gen.2 to
reach 100,000 units in the current financial year. In order to ensure
that the plant is able to meet demand, various upgrading initiatives
of its facilities, equipment and engineering processes have been
implemented at the plant as well as among our main vendors.
Concurrently, preparation work for the left hand drive (LHD) market for
the face-lift Gen.2 and Persona is being carried out and is expected to
be ready by August 2008.
The Tanjung Malim plant
074 PROTON 2008 Annual Report
• operations review
PROTON Cikarang, IndonesiaPT Proton Tracoma Motors was renamed PT Proton Cikarang Indonesia
following PROTON Group’s successful completion of the acquisition
of the remaining 49% equity interest in the Company from Tracoma
Holdings Berhad during the year under review.
“ I’ve been driving PROTON cars for the past 18
years, and I am happy with my PROTON. It’s good
value for money and comes with great service. ”Mohammad Tahir
Waja owner
Being primarily involved in the manufacturing, assembly, sales and
distribution of motor vehicles in the Indonesian as well as ASEAN
markets, PT Proton Cikarang is currently undertaking the re-painting
process and pre-delivery inspection (PDI) efforts for our Wira taxis in
Indonesia. The facility is also carrying out PDI initiatives for the Gen.2,
Savvy, Waja and Satria Neo in the country.
075PROTON 2008 Annual Report
• operations review
Prospects
Production volume for the new financial year is forecasted to increase
by 55%, to reach a total production volume of 205,000 units. The
domestic market will take up approximately 75% of this volume, while
the remaining 25% is reserved for PROTON’s export markets. This
production level will utilise almost 60% of PROTON’s installed plant capacity.
High demand for the new PROTON Saga is expected to dominate the
current product mix. With the output for the new Saga expected to hit
96,000 units this financial year, PROTON and its vendors are currently
performing readiness audits, validation of processes and capacity
confirmation to ensure that delivery will be met.
Meanwhile, PROTON also expects the demand for the CamPro engine to
be significantly higher this year. As such, the CamPro engine component
machining and assembly capacity from casting to machining to final
assembly have been reviewed with the view to increase the current
installed capacity of 180,000 units to 250,000 units a year.
The output for the new Saga is expected to reach 96,000 units in the 2008/2009 financial year
076 PROTON 2008 Annual Report
• operations review
Operations
During the year, Lotus successfully introduced three new market-
driven refreshments of its product line-up, namely the Elise
SC220, Exige 240 and Cup 260. The positive response to the
offerings enabled Lotus to bolster its performance during the year.
In the year under review, we also saw Lotus making further
in-roads into the global marketplace by successfully opening sales
outlets in Malaysia, South Korea, Thailand and Estonia. The expanded
reach should translate into better access, thereby generating improved
sales for the brand in the near future.
Lotus’ automotive engineering consultancy business, which is carried
out by the Lotus Engineering Division, recorded a significant increase
in business activities worldwide, particularly in the United States, during
the year.
LotusIn tandem with our overall improved performance, Lotus, a subsidiary
of PROTON, recorded a significant turnaround during the year under
review and is well-poised for further growth ahead.
Following its successful recapitalisation exercise undertaken in the
previous financial year, which resulted in a strengthened balance sheet,
Lotus leveraged on its position as a niche manufacturer of sports cars
and its leading expertise in high-technology engineering consultancy to
drive profitability.
Consequently, the year under review saw Lotus recording a profit of
£1.5 million or RM9.8 million compared to a loss of £4.9 million or
RM31.9 million in the previous financial year. This not only marks a
significant improvement of 131% year-on-year but has far exceeded
the first year target of Lotus’ 5-Year Strategic Plan.
“ If it’s a life of constant challenges and
excitement that you’re looking for, then PROTON is
the place to be in. I’ve been with PROTON for more
than 11 years, and I’ve enjoyed every moment. ”Edward Tan Yu Tho
Manager, Marketing & Operations, Lotus Cars Malaysia
077PROTON 2008 Annual Report
• operations review
Prospects
Moving forward, Lotus will be introducing more product enhancements
for its Elise, Exige and Europa models in the current financial year. In
addition, the company will also be expanding to new markets including
China and the Gulf States.
The company’s production of the world’s first all-electric sports car for
the California-based Tesla Motors Inc is expected to increase production
significantly by end of March 2009, thus positively impacting the
Group’s bottom line in the current financial year.
Lotus has also unveiled the first all-new sports car in 13 years. The
Evora, a 2+2 mid-engine V6 model, is expected to see its first delivery
to customers beginning April 2009.
Lotus foresees growth in the engineering consultancy business
particularly in fast-developing countries like China and India. Hence,
the Group plans to build on its know-how and track record to tap this
growth market.
The Lotus Evora
The elegant interior of the Lotus Evora
As a result, US-based Lotus Engineering Inc registered record profits
during the year, while Lotus Engineering Malaysia recorded a positive
turnaround. Overseas expansion included the setting-up of a sales
office in Japan and a subsidiary in China.
The year was also marked by the successful roll-out of the Europestar
in China as a result of a collaboration between the Youngman Group
and PROTON, with significant technology and engineering involvement
from Lotus Engineering.
Lotus also entered into a major strategic alliance during the year
with the King Abdul Aziz Centre for Science and Technology
(‘KACST’) in Saudi Arabia. This initiative will enable Lotus and
PROTON to jointly explore collaborative opportunities and technology
R&D with KACST.
078 PROTON 2008 Annual Report
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Quality Management
PROTON’s unwavering commitment to making continuous improvements in quality is
reflected in the re-establishment of the Group Quality Division, which is specifically tasked
to focus on quality development and quality improvement initiatives throughout the
business value chain from design until market.
Initiatives carried out by the Division during the year under review were more focused
and effective due to the input from the Customer Action Team (CAT), which has provided
Quality improvement is an integral part of PROTON’s development
079PROTON 2008 Annual Report
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“ PROTON is improving; there are positive
changes, with quality improving and sales
increasing despite the petrol hike. People are
now also looking forward to the NGV. ”Irene Chay
PROTON dealer
invaluable customer feedback information, as well as ‘lessons learned’
from the Quality Improvement Committee (QIC) framework designed
to manage and resolve quality issues Group-wide on a timely basis.
The CAT was instrumental in resolving customer concerns in the market
resulting in improvements in the Customer Satisfaction Index (CSI)
over the past two years, from below industry average to acceptable
quality levels.
Quality improvement activities were also carried out in areas of varied
inspection standards, judgement leveling, secondary defects and transit
damages that occur during the vehicle delivery processes. As a result,
the recently concluded financial year saw the overall delivery quality
level registering an improvement of more than 40%.
Inspection standards were enchanced to ensure quality improves
080 PROTON 2008 Annual Report
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since the Persona and new Saga were introduced into the market,
customer complaints have reduced significantly and quality perception
for PROTON products has greatly improved as reflected in the notable
improvements in the CPC and DPU levels.
Additionally, from the market feedback gauged via warranty provisions
and Product Quality Report (distributors’ feedback), we have recorded
remarkable improvements that reflect PROTON’s strong commitment
to satisfying our customers’ needs.
Market QualityQuality is about customer satisfaction and meeting customers’
expectations. It is indeed challenging, to say the least, to improve
quality in the market given the ever-changing expectations and quality
perception among car buyers today.
As such, the key to improving quality in the market is to understand the
needs and perceptions of our customers. Towards this end, the Group
established a ‘Voice of Customer’ framework to facilitate feedback
on quality issues from the market. This is vital in order to establish
quick and effective counter-measures to resolve critical quality issues
in the market in a timely manner while preventing recurrence of the
quality issues in future models.
During the year under review, a new feedback mechanism called
Customer Priority Index (CPI) was introduced with the aim to help drive
and resolve quality issues in the market. CPI is a matrix that calculates
and prioritises customer feedback based on aspects such as technical
data, warranty claims and severity of the quality issue.
The Group also gauged feedback on product quality in the market
via indicators such as concerns per car (CPC), delivery quality
defect-per-unit (DPU) and warranty provisions. On this score,
Manufacturing QualityIn order to further enhance manufacturing of PROTON cars, we
must approach quality from a different perspective. PROTON must
endeavour for quality excellence by emphasising prevention rather
than detection as well as building quality into the design, development
and manufacturing processes.
Towards this end, the Group’s focus to build quality into design at
an early stage of product development is reflected in the MPV
project. For this P6-20A model (MPV project), a Design Failure Mode &
Effect Analysis (DFMEA) was established based on the records of our
past experiences.
In 2007, the Group also introduced the Supplier Quality Risk
Number (SQRN) in a bid to raise the quality level at the supply
chain. The suppliers are classified into different risk levels based
on warranty claims, line rejections and audit results. By paying
closer attention to our suppliers and working with them to improve,
we were able to enhance the quality of our products from the early
stages of development.
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