Proton Case Study
ASIAN CASE RESEARCH JOURNAL, VOL. 16, ISSUE 2, 347–377 (2012)
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This case was prepared by Jane Terpstra Tong, Robert H. Terpstra of Monash University Sunway Campus, Malaysia and Lim Ngat Chin of The Nottingham University of Malaysia Campus as a basis for classroom discussion rather than to illustrate either effective or ineffective handling of an administrative or business situation. Please send all correspondence to Jane Terpstra Tong, Department of Management, Monash University Sunway Campus, Jalan Lagoon Selatan, Bandar Sunway, 46150 Selangor Darul Ehsan, Malaysia. E-mail: jane.tong@ monash.edu
Proton: Its rise, Fall, and Future Prospects
For Dato’ Haji Syed Zainal Abidin Tahir (Syed Zainal, hereafter), Managing Director of Proton, recent headlines such as “Auto Sector Faces Numerous Challenges” and “European Carmakers Zoom in”1 were simply reminders of the challenges his company faced. Proton had been troubled by its declining share of the domestic auto market (Exhibit 1) and consequent dwindling profits and margins. Without taking into account the government’s R&D grant in 2007/2008, the company suffered three straight years of losses from 2007 to 2010. Its finances recovered a little in 2009/2010, thanks to the government’s “cash for clunkers” incentive programme, a MYR143 million (USD48 million)2 R&D grant from the government, and some improvement in sales. However, its net profit margin barely reached 3% — very low by industry standards — and most of its performance measures lagged behind those of the industry leaders (Exhibits 2 and 3). The stock price of Proton’s listed parent, Proton Holdings Berhad (Proton Holdings Limited), had been substantially lower than its net asset value for several years (Exhibit 3). Because of its low market to book ratio and the heavy government subsidies paid to Proton, Mr. Syed Zainal was under tremendous pressure to turn around Proton’s performance. Adding further pressure, the changing institutional environment
acrj
This case was prepared by Jane Terpstra Tong, Robert H. Terpstra of Monash University Sunway Campus, Malaysia and Lim Ngat Chin of The Nottingham University of Malaysia Campus as a basis for classroom discussion rather than to illustrate either effective or ineffective handling of an administrative or business situation. Please send all correspondence to Jane Terpstra Tong, Department of Management, Monash University Sunway Campus, Jalan Lagoon Selatan, Bandar Sunway, 46150 Selangor Darul Ehsan, Malaysia. E-mail: jane.tong@ monash.edu
Proton: Its rise, Fall, and Future Prospects
For Dato’ Haji Syed Zainal Abidin Tahir (Syed Zainal, hereafter), Managing Director of Proton, recent headlines such as “Auto Sector Faces Numerous Challenges” and “European Carmakers Zoom in”1 were simply reminders of the challenges his company faced. Proton had been troubled by its declining share of the domestic auto market (Exhibit 1) and consequent dwindling profits and margins. Without taking into account the government’s R&D grant in 2007/2008, the company suffered three straight years of losses from 2007 to 2010. Its finances recovered a little in 2009/2010, thanks to the government’s “cash for clunkers” incentive programme, a MYR143 million (USD48 million)2 R&D grant from the government, and some improvement in sales. However, its net profit margin barely reached 3% — very low by industry standards — and most of its performance measures lagged behind those of the industry leaders (Exhibits 2 and 3). The stock price of Proton’s listed parent, Proton Holdings Berhad (Proton Holdings Limited), had been substantially lower than its net asset value for several years (Exhibit 3). Because of its low market to book ratio and the heavy government subsidies paid to Proton, Mr. Syed Zainal was under tremendous pressure to turn around Proton’s performance. Adding further pressure, the changing institutional environment