PROTON 2008 Annual Report PROTON VOICESir.chartnexus.com/proton/website_HTML/attachments/attachment_2… · PROTON’s journey. Their heartfelt views, be that of a loyal customer,

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


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


“ 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


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


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


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

016 PROTON 2008 Annual Report• corporate profile


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.


• The Malay Mail declared the PROTON Satria Neo, winner of the

Coolest Car of 2006.


• 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


• Dato’ Michael Lim Heen Peok


• Datuk Zalekha Binti Hassan

Non-Independent Non-Executive Director

• Encik Mohammad Zainal Bin Shaari


• Dato’ Ahmad Bin Haji Hashim


• Dato’ Mohd Izzaddin Bin Idris


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


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%)


026 PROTON 2008 Annual Report• board of directors


027PROTON 2008 Annual Report• board of directors


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. ”


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


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. ”


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


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. ”


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


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. ”


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


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


(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


“ Human Capital is PROTON’s most important asset. ”PROTON’s Chairman

greeting staff during a visit

to the manufacturing plant.


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

47Tho

usan

ds 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.


-

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.


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


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


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


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.


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


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.


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.


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.


“ 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.


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


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


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


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


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


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


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.


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

Documents

PROTON 2008 Annual Report PROTON VOICESir.chartnexus.com/proton/website_HTML/attachments/attachment_2… · PROTON’s journey. Their heartfelt views, be that of a loyal customer,