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Wednesday, September 27, 2006

Maybank Securities report on Automotive Industries

Last week, Maybank Securities issue a report on Automotive Industries stating that "national segment of Commercial vehicle saw a sharp increase of 72.6%. We believe this is due to strong sales in national multi-purpose vehicles (MPV), especially by Naza-Kia which launched a very aggressive promotional drive in July 2006..........Compared with July 2006, TIV increased 7.4% to 47,189 units in August 2006. The higher month-on-month (m-o-m) volume was mainly due to higher national commercial vehicle sales, which rose a drastic 130.4%. This is again likely caused by the aggressive promotion by Naza-Kia on their MPVs."

Previously, Naza grow has threaten Proton's sales and this cause Tengku Mahalee, CEO of Proton at that point of time to complaint it to Proton's adviser Ex-Prime Minister Tun Dr Mahathir. Mahathir then create the controversial National Car Status issue.This is the different between an employee of GLC and entrepreneur . An employee of GLC complaint and seek government intervention whereas entrepreneur find ways to grow their company.

Note: This is part of the reply to comment by reader Bigjoe99

Related Post: Proton, nurture Malaysia's brand or bumiputra entrepreneur
Proton, nurture Malaysia's brand or bumiputra entrepreneur 2


Monday, September 11, 2006

Proton would not benefit from General Motor (GM)

Last Saturday, The Star's Bizweek reported that industry sources say that US-based auto giant General Motors Corp may be interested to take up to 35% of equity in Proton Holdings, and may make an offer as early as next week to state controlled investment arm Khazanah Nasional Bhd.

General Motors is among the largest companies in the world in terms of market capitalisation. It has under its belt marques such as Chevrolet, Vauxhall, Opel, Holden, GMC and Pontiac.

“It could be that General Motors may look to Malaysia to be main assembly plant for passenger vehicles while, its operations in Thailand focuses on pick up trucks and commercial vehicles. It could be some form of break down.

“Malaysia is after all the largest passenger car market in Southeast Asia, while Thailand is a haven for pickup trucks and the like,” an industry observer laments.

At present, General Motors has a presence in Thailand, via General Motors (Thailand) Ltd, which operates a manufacturing plant in Rayong, which exports vehicles as well. Among the marques built in Thailand include Chevrolet, Holden, Opel, Subaru and Vauxhall among others. The Chevrolet Zafira is among the models built in Thailand and exported.

Possible alliance with DRB-Hicom

There is speculation that conglomerate DRB Hicom may be partnering General Motors in its venture to take over the helm of Proton Holdings.

Details are however unclear, as officials of DRB Hicom are keeping information close to their chests. It was previously reported that tycoon Syed Mokhtar, who controls 15.8% of DRB Hicom, was looking at taking over Proton Holdings with a foreign strategic partner.

South Korea Experience

The most successful automobile company in South Korea Hyundai aim to chart it own direction in global automobile industry. Although Hyundai dispose off 12% shares to Mitsubishi group in 1979 (Like Proton). Hyundai remain relatively independent on it global market strategy. Similarly, another South Korea automobile company Kia disposed off 20% shares to Ford, Mazda and Itochu but this does not restricted Kia brand strategy in global market.

Pioneer in South Korea automobile industry Daewoo, however, restricted by General Motor global brand strategy. Daewoo, frustrated by General Motor restriction have to buy back shares hold by General Motor in 1992. However, Daewoo have difficulties un catching up Hyundai and Kia in Daewoo. Daewoo take over Ssanyong during Asia financial crisis but become insolvent after one year. General Motor has take over back Daewoo eventually.

looking at experience of Daewoo. General Motor clearly not an ideal partner for Proton unless GM never restrict the country which Proton intend to penetrate.


Tuesday, September 05, 2006

Proton, nurture Malaysia's brand or bumiputra entrepreneur 2

When I first comment on this issue on 17th July 2006. I do not aware of any plan by any entrepreneur attempted to acquire Proton.

Latest issue of The Edge reported that two recent proposals to "rescue" the national car company has been received by government.

The first was submitted by the Naza Group last year and recently, DRB-Hicom Bhd submitted a second proposal. And there is another proposals submitted by Sime Darby last year. The Edge reported that Sime Darby CEO Ahmad Zubir Murshid admitted that a proposal was submitted to the government "a long time ago".

Sime Darby, however, is a Government Link Company (GLC)...not entrepreneurs driven company. Sime Darby is a dealer and assembler of Ford in Malaysia, like Hyundai in South Korea before joint venture with Mitsubishi Motor.

DRB-Hicom, control by Tan Sri Syed Mokhtar in mid-2005 show a floundering performance, stated Leela Barrock, a journalist with The Edge. "These are just not car people," says an analyst. DRB itself may have had some history in automotive industry but Syed Mokhtar does not, write Leela Barrock. Having said that, it must be noted that DRB itself is a company that need saving. More interestingly, in its automotive segment, DRB actually posted loss of RM12.27million for 1QFY2007, compare to a profit of RM28.35 million in previous corresponding period. : Naza, DRB-Hicom to buy Proton?
南洋商报: 多元重工业纳莎建议购普腾股权 赛莫达再斗纳西慕汀
Business Times : Proton firms on talk of stake tussle

In another commentary: "Should entrepreneurs get Proton?". The Edge's Leela Barrock analyze the two Tan Sri. The she write: Nasimuddin has his Korea Kia connections, which could be used to roll out vast numbers of Korean lookalikes with Korean technology-no, not an exciting prospect for the poor Malaysian driver who would be "graduating" from a Proton to a Kia.

Later, she stated it was Mahathir who want Proton to start spawning more models against advise that a car company needs critical economies of scale. The late Tan Sri Yahaya Ahmad agreed to fulfill Mahathir's dream of multiple Protons and thus was rewarded with the national car company in the late 1990s.

He blame the late Yahaya acquired British car company without board approval, launch Tiara, a badly received car with an ancient Citroen engine. Systems and processes that are required for the healthy management of a company were done away with to fan the fires of entrepreneurial zeal.. And it was Yahaya who turned the screws on parts suppliers, which may have led to an erosion of quality.

The conclusion, she stated that entrepreneurial fervour has not worked for Proton.....against what I have suggested.

Actually, Yahaya was rewarded with a Bank (Eon Bank), a transport company (Intra-Kota) lead to group become too diversified. I find Syed Mokhtar group has some similarity with the empire of late Yahaya. Thus,, causing recent loss of DRB-Hicom Bhd. And there is a deal between the government (Mahathir) and entrepreneur (Late Yahaya) like Tajuddin Ramli, causing the failure.

Naza, however, is more focus than the above two. Although Nasimuddin have other non-automotive business like hotel and taxi company.

At the moment, there is only a few automotive company in the world run by government. Any successful one?

星洲日報: 分析員:售股權給納莎和多元資源無助解決普騰問題

Update:No proposals to buy Proton stake


Sunday, September 03, 2006

My comment Budget 2007-1

Thank you Fashion Asia for waiting for my comment.


The main beneficiaries sector is Banking and Islamic Financial Sector:

To encourage banks to expand overseas and establish a regional presence, the Government has proposed that Malaysian-owned banks be given tax exemption for five years on income received from their new branches or remittances from subsidiaries overseas, operating within the three-year period, from the year of assessment 2007.

This would encourage local banks to explore and increase their presence in new and competitive regional and global markets.

Currently, Maybank has a large branch network overseas especially in Singapore. Public Bank Bhd has aggressively expanding overseas like Vietnam and China and has a subsidiary in Hong Kong. Bumiputra-Commerce Bank, however, expand via Merger & Acquisition, apparently, this unable to benefit from the tax break. Hong Leong Bank recently has obtain approval to open branch and representative office in Vietnam and China respectively.

Other than that, government also announced 6 measure to boost Islamic finance. This encouraging foreign players to set up their Islamic financial base in Malaysia and local banks to venture abroad with their Islamic banking expertise. Currently, Public Bank Berhad has the largest Islamic finance function in Malaysia.

Updated link: Towards a global Islamic financial hub

UMNO Assembly Budget

Generally, Budget move from traditional October to September ahead of UMNO assembly was seen as an UMNO Assembly budget. With announcement of bonus to civil servant plus project announced for small bumiputra contractor in construction industry has been expected.

Updated link : Potential winners (large and small- to medium players )for projects under the 9MP
Sector woes likely to end

Towards 70 million population policy

70 million population policy was announced by Tun Dr Mahathir. However, Budget 2007 indicated that Pak Lah never abandon the policy. Government removal of the examination fees for the UPSR, PMR, SPM and STPM will be a great help to big family with large number of children. Childcare centre will be establishing in all government department. This is a great relief for working mother and promote 70 million population policy

Promote entrepreneurship

Reduction in Corporate Tax to 27% in 2007 and 26% in 2008 promote setting up of company or entrepreneurship. This is because Personal Income Tax still at 28% at highest rate while company with profit less than RM500,000 tax at 20% while Profit more than RM500,000 tax at 27%. Thus, its time high remuneration employee, sole proprietor or partnership for from a limited company if your income exist RM500,000 and you pay tax more than 20%.


Saturday, September 02, 2006