2008 Annual Report
Transcription
2008 Annual Report
PROTON 2008 Annual Report PROTON ‘VOICES’’ A NEW SAGA BEGINS PROTON Holdings Berhad (Company No.623177-A) PROTON 2008 Annual Report 01 P ROTON ‘VOIC 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 Purpose Driving Malaysia’s transformation into a leader in technology We are a passionate group of people working together, creating and quality. exhilarating products and services for global markets, synonymous Vivid Description We deliver innovative and superior quality products and services. Our brands inspire confidence and pride. with great styling, innovation and leading technology. PROTON 2008 Annual Report • corporate mantra & core values 03 Core Values Quality Teamwork We make products that work the first time, every time. We trust, respect and share knowledge to foster teamwork at Customer Focus the workplace. Customers are the source of our income. We deliver on our promises Speed to our customers’ satisfaction. We have a “can-do” attitude and will not rest until the problem is Innovation solved. We have an inherent sense of urgency in everything we do. We challenge convention, always seeking new and better ways of Caring doing things. We view change as opportunity. 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, In implementing our policy, we shall, where reasonably practicable:- healthy and conducive working environment.” • Comply with all rules and regulations concerning the 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. 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. PROTON 2008 Annual Report • PROTON’s policies 05 Quality Policy To assist us in achieving our goals we shall work together and towards “PROTON is committed to manufacture quality cars, knock-down parts this end, our employees shall:- and spare parts that satisfy customer requirements and meet the • Abide by all rules and regulations concerning the workplace; required safety and environmental standards of each market.” • 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. 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 This is our objective and it is our intention to put this EHS Policy into action and to make it our way of life. • Provide a culture and environment of continuous learning, “Environment, health and safety are our priority.” through systematic and structured training programmes; improvement and innovation towards total quality excellence; • Provide a conducive, safe and healthy working environment. 06 PROTON 2008 Annual Report Contents PROTON 2008 Annual Report 02 Corporate Mantra & Core Values 22 Corporate Information 04 PROTON’s Policies 24 Group Operations 10 Financial Calendar 26 Board of Directors 11 Key Financial Indicators 28 Profile of Directors 12 Summary of Financial Highlights for Five Years 34 Senior Management 16 Corporate Profile 36 Other Senior Officers 20 Awards and Recognition 40 Chairman’s Statement 54 Managing Director’s Review PROTON 2008 Annual Report 62 Operations Review 144 Statutory Financial Statements 106 Statement on Corporate Governance 237Shareholdings Statistics 123 Additional Compliance Information 240Properties Owned by PROTON Group 126 Statement on Internal Control 244Share Price and Volume Traded 130 Risk Management 245Notice of Annual General Meeting 136 Calendar of Events 2007 - 2008 248Statement Accompanying the Notice of Annual General Meeting Form of Proxy 07 08 PROTON 2008 Annual Report PROTON 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. ” 09 010 PROTON 2008 Annual Report • financial calendar 15 August 2007 • Notice of Fourth (4th) Annual General Meeting 21 February 2008 • period ended 31 December 2007 28 August 2007 • Unaudited First (1st) Quarter results for the period ended 30 June 2007 26 May 2008 • Fourth (4th) Annual General Meeting 30 November 2007 • Unaudited Fourth (4th) Quarter results for the period ended 31 March 2008 6 September 2007 • Unaudited Third (3rd) Quarter results for the 31 July 2008 • Audited accounts for the financial year ended 31 March 2008 Unaudited Second (2nd) Quarter results for the period ended 30 September 2007 6 August 2008 • Notice of Fifth (5th) Annual General Meeting 28 August 2008 Fifth (5th) Annual General Meeting PROTON 2008 Annual Report • key financial indicators Basic earnings per share (sen) Net assets per share (RM) 10.67 92.9 10.69 10.14 80.6 9.52 9.87 33.6 8.5 (107.3) 2004 2005 2006 2007 2008 Dividend paid (RM’ million) 2004 2005 2006 2007 2008 Retained profits carried forward (RM’ million) 137.3 4,916.9 4,908.7 4,611.8 93.3 4,476.2 54.9 4,291.7 27.5 2004 2005 2006 2007 2008 2004 2005 2006 2007 2008 011 012 PROTON 2008 Annual Report • summary of financial highlights for five years BALANCE SHEETS AS AT 31 MARCH 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 10.4 10.4 10.4 6.3 6.3 105.8 38.4 46.6 3,881.8 3,804.4 3,271.1 Investments Deferred tax assets Total Non-Current Assets - 3,847.2 - 3,781.3 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 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 Current investments PROTON 2008 Annual Report • summary of financial highlights for five years 013 BALANCE SHEETS AS AT 31 MARCH 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 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 0.3 - 5,860.2 5,567.1 Retained profits Minority interest Total Equity - 5,421.2 - 5,230.6 - 5,870.6 NON-CURRENT LIABILITIES Long term liabilites Deferred tax liabilities Total Non-Current Liabilities 230.5 181.6 100.3 759.6 447.4 2.4 0.8 0.8 1.1 1.0 232.9 182.4 101.1 760.7 448.4 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 8,056.3 014 PROTON 2008 Annual Report • summary of financial highlights for five years INCOME STATEMENTS FOR THE YEAR ENDED 31 MARCH RM million 2008 2007 2006 2005 2004 (Restated) (Restated) (Restated) (Restated) 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 4,476.2 4,319.2 4,963.6 5,054.2 4,705.1 - (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 Revenue Retained profit attributable to shareholders Dividend SHARE INFORMATION 2008 2007 2006 2005 2004 33.6 (107.3) 8.5 80.6 92.9 - 5.0 10.0 25.0 17.0 9.87 9.52 10.69 10.67 10.14 549,213 549,213 549,213 549,213 549,213 Per Share Basic earnings/(loss) (sen) Tax-exempt dividend paid Net assets Issued share capital PROTON 2008 Annual Report 015 016 PROTON 2008 Annual Report • corporate profile Since its launch, the new Saga has become the fastest selling PROTON model to date PROTON 2008 Annual Report • corporate profile 017 PROTON was incorporated on 7 May 1983 with three primary national policy objectives: • 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 “ 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 industrial capability. 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, PROTON 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. 019 020 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 Awards 2007 • Reader’s Digest Trusted Brand 2008 Gold Award for Car Category. • Reader’s Digest Trusted Brand 2007 Gold Award for Car Category. • Asian Auto - VCA Auto Industry Awards 2008 - Best People’s Car • The Malay Mail declared the PROTON Satria Neo, winner of the 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. 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. PROTON 2008 Annual Report • awards and recognition 021 Awards 2005 Awards 2002 • Reader’s Digest Super Brand 2005 Gold Award for Car Category. • Best Landscape Competition (Second Place - Factory Category). • Merdeka Millennium Endurance Race 2005 - 1st place-Overall • Appreciation Award for Contribution to the Development of and Class ‘O’ Winner. • Malaysian Rally Championship 2005 - Overall Class Winner Malaysian Motorsports for 2002. • 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 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. • Industry Excellence Award 2003, Quality Management Category III. • Industry Excellence Award 2003. Awards 2001 • Best Landscape Competition (First Place - Factory Category). • 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 17 December 2004 Chairman/Non-Independent Non-Executive Director • Dato’ Haji Syed Zainal Abidin B Syed Mohamed Tahir 1 January 2006 Managing Director • Tuan Haji Abdul Jabbar Bin Abdul Majid 12 April 2004 Independent Non-Executive Director • Tuan Haji Abdul Kadir Bin Md Kassim 10 March 2005 Independent Non-Executive Director • Dato’ Michael Lim Heen Peok 15 September 2006 Independent Non-Executive Director • Datuk Zalekha Binti Hassan 11 February 2008 Non-Independent Non-Executive Director • Encik Mohammad Zainal Bin Shaari Non-Independent Non-Executive Director • Dato’ Ahmad Bin Haji Hashim 17 December 2004 (Resigned w.e.f. 3 April 2008) Non-Independent Non-Executive Director 26 October 2005 (Resigned w.e.f. 11 February 2008) • Dato’ Mohd Izzaddin Bin Idris 15 September 2006 (Resigned w.e.f. 30 November 2007) Non-Independent Non-Executive Director PROTON 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 Low Tel : 03 - 5191 5864 023 024 PROTON 2008 Annual Report • group operations PROTON Holdings Berhad Engineering Services Manufacturing Lotus Advance Technologies Sdn Bhd (100%) Proton Tanjung Malim Sdn Bhd (100%) Proton Engineering Research Technology Sdn Bhd (100%) Perusahaan Otomobil Nasional Sdn Bhd (100%) Lotus Group International Limited (100%) Proton Automobiles China Ltd (BVI) (100%) Group Lotus Plc (100%) Goldstar Proton Automobiles Co Ltd (49%) Lotus Cars Ltd (100%) PT Proton Cikarang Motors (Indonesia) (100%) Lotus Engineering Ltd (100%) (formerly known as PT Proton Tracoma Motors (Indonesia)) Lotus Engineering Co Ltd (Shanghai) (100%) Miyazu (Malaysia) Sdn Bhd (51%) 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%) PROTON 2008 Annual Report • group operations Sales & Distribution Investee & Associate Companies Proton Marketing Sdn Bhd (100%) Exedy (Malaysia) Sdn Bhd (45%) Proton Edar Sdn Bhd (100%) Netstar Advanced Systems Sdn Bhd (40%) Proton Cars (UK) Ltd (100%) PHN Industry Sdn Bhd (35%) Proton Cars Australia Pty Limited (100%) Marutech Elastomer Industries Sdn Bhd (25%) Proton Motors (Thailand) Limited (100%) Vina Star Motors Corporation (Vietnam) (25%) Proton Singapore Pte Ltd (100%) Aluminium Alloy Industries Sdn Bhd (19%) Proton Parts Centre Sdn Bhd (55%) Technomeiji Rubber Sdn Bhd (15%) PT Proton Edar Indonesia (95%) Peps-JV Sdn Bhd (10.50%) Proton Cars Benelux NV SA (Belgium) (99%) Ara Borgstena Sdn Bhd (6.67%) Property Others Proton Hartanah Sdn Bhd (100%) Yayasan Proton Proton Properties Sdn Bhd (100%) Lotus Pension Trustees Ltd (100%) Proton City Development Corporation Sdn Bhd (40%) Lotus Cars Foundation (100%) Financial Services Proton Commerce Sdn Bhd (50%) Lotus Finance Ltd (49.9%) Proton Finance Ltd (49.99%) 025 026 PROTON 2008 Annual Report • board of directors PROTON 2008 Annual Report • board of directors 027 Sitting (left to right) Standing (left to right) Dato’ Mohammed Azlan Bin Hashim, Dato’ Michael Lim Heen Peok, Dato’ Haji Syed Zainal Abidin B Syed Mohamed Tahir. Datuk Zalekha Binti Hassan, Tuan Haji Abdul Jabbar Bin Abdul Majid, Tuan Haji Abdul Kadir Bin Md Kassim. 028 PROTON 2008 Annual Report • profile of directors Dato’ Mohammed Azlan Bin Hashim Chairman/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 PROTON’s financial results for this calendar year Berhad, and Malaysian Industry-Government Group for High Technology. is a clear indication that the Group has progressed He was appointed Chairman of Universiti Darul Iman Malaysia in 2006. and is moving in the right direction. 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 2008 Annual Report • profile of directors 029 Dato’ Haji Syed Zainal Abidin B Syed Mohamed Tahir Managing Director Aged 46, Malaysian 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 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. ” 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. 030 PROTON 2008 Annual Report • profile of directors Tuan Haji Abdul Jabbar Bin Abdul Majid Independent Non-Executive Director Aged 63, Malaysian 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 Good corporate governance is the foundation of the culture and business practices of the PROTON Group. ” 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. PROTON 2008 Annual Report • profile of directors 031 Tuan Haji Abdul Kadir Bin Md Kassim Independent Non-Executive Director Aged 68, Malaysian 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- PROTON regards risk management as an integral part of the Group’s operations and a consistent, disciplined and systematic approach for 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. managing risks was endorsed and implemented Tuan Haji Abdul Kadir has attended all Board of Directors’ Meetings within the Group. 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. 032 PROTON 2008 Annual Report • profile of directors Dato’ Michael Lim Heen Peok Independent Non-Executive Director Aged 60, Malaysian 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 We are making good progress in improving our product performance, functionality and quality. ” 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. PROTON 2008 Annual Report • profile of directors 033 Datuk Zalekha Binti Hassan Non-Independent Non-Executive Director Aged 55, Malaysian 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 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. ” 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. 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 PROTON 2008 Annual Report • senior management 035 “ PROTON has demonstrated to its stakeholders its ability to transform into a viable and profitable automotive company in spite of our numerous challenges. ” “Developing - 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 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 • other senior officers Other Senior Officers Abdul Jamil Bin Johari General Manager, Group Security Low Pheng General Manager, Group Internal Audit Muhammad Aris Bin Anuar General Manager, Manufacturing (Shah Alam) Mohd Raziff Bin Ahmad General Manager, Manufacturing (Tanjung Malim) Tan Chun Weng General Manager, Group Finance Tajul Zahari Bin Abu Bakar General Manager, Engineering Wan Nadzree Bin Jaafar General Manager, Corporate Planning Mohd Nadzir Bin Che Omar General Manager, Proton Properties Sdn Bhd Mohamad Azeman Bin Redzuan Director, PT Proton Cikarang, Indonesia Dr. Shamsuddin Bin Baharin General Manager, Transformation Office & Special Projects Azmi Bin Idris Head, Group Quality Management Hamdan Bin Mohd Nor General Manager, International Sales & Services PROTON 2008 Annual Report • other senior officers Zamariah Binti Ismail General Manager, Group Information & Communication Technology Faridahanom Binti Idris Senior Manager, Corporate Communications & Events Izwan Bin Zainuddin Senior Manager, Corporate Finance Heads of International Subsidiaries (left to right) Michael J. Kimberley Chief Executive Officer, Group Lotus Plc Brian Collier Managing Director, Proton Cars (UK) Ltd John Startari Managing Director, Proton Cars Australia Pty Limited (left to right) Moses Tan Managing Director, Proton Singapore Pte Ltd Djunaedi Hadiwidjaja President Director, PT Proton Edar Indonesia 037 038 PROTON 2008 Annual Report PROTON 2008 Annual Report “ Human Capital is PROTON’s most important asset. ” PROTON’s Chairman greeting staff during a visit to the manufacturing plant. 039 040 PROTON 2008 Annual Report • chairman’s statement Dato’ Mohammed Azlan Bin Hashim Chairman / Non-Independent Non-Executive Director PROTON 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 Overview The 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%. 041 042 PROTON 2008 Annual Report • chairman’s statement Primary factors that contributed to the resurgence in the industry Financial Performance include new vehicle models launched, the stabilisation of duty The improved market conditions during the year under review, coupled structures, the firming up of the price of second-hand vehicles, greater with PROTON’s strategic commitment to become a more resilient availability of loans for car purchase as well as the increase in salary for and efficient national automotive company, has resulted in a healthier civil servants in 2007. financial performance for the Group. Improved conditions for the nation’s automotive industry had a positive For the financial year ended 31 March 2008, the Group successfully impact on PROTON’s financial performance. The Group capitalised on recorded a profit after tax of RM185 million on the back of an improved this uptrend with the timely launching of the Persona in August 2007 revenue of RM5.6 billion. This marks a significant turnaround to and the Saga in January 2008. 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. 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 The Group’s cash and cash equivalents as at 31 March 2008 have also Group is not oblivious to the impact of the removal of fuel subsidies on improved significantly to RM1.17 billion. This is after taking into account the industry. On this premise, PROTON will continue to be aggressive research and development (R&D) expenditure undertaken during the in its sales and marketing strategies while offering products that cater financial year, expenditure for product refreshers due later this year, to the needs of today’s consumers. and the new PROTON MPV (multi-purpose vehicle) currently under development. Improvement in TIV: Passenger Car Segment Thousands The year’s financial performance is attributable to improved sales 600 Passenger Car 552 487 500 400 406 490 148 103 125 488 510 47 108 CV, 4WD/SUV, Windows Vans, MPV Passenger Vehicle Commercial Vehicle Total Industry Volume (TIV) introduction and sustained popularity of the Persona and Saga. The higher sales volume translated to an increase in revenue of 19% yearon-year. This higher demand for the Persona and Saga also generated 76 a better product mix for the Group resulting in higher margins. 300 200 volume, which increased by 27% over last year, mainly due to the 330 384 404 365 380 463 In addition, the financial performance was also augmented by the significant increase in other operating income, including a Government 100 0 grant in recognition of PROTON’s investments in R&D amounting to 2003 2004 2005 2006 2007 2008 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 RM194 million. PROTON 2008 Annual Report • chairman’s statement Revenue Export Domestic Export 8,000.0 RM'million 6,000.0 arrangement with China-based Jinhua Youngman Group, amounting 6,441.0 This commitment to R&D has enabled PROTON to develop the 5,494.8 5,000.0 4,131.9 necessary capabilities to enable it to design, develop, engineer and manufacture its own cars. More importantly, as these cars are 4,000.0 3,162.3 3,000.0 developed indigenously, PROTON retains the right to any intellectual 2,000.0 1,000.0 property in its export markets, in particular, the Group’s business to RM33 million. 7,052.0 7,000.0 043 1,431.3 1,355.9 1,525.0 1,489.7 866.4 property thereto. These can then be further monetised through various licensing arrangements. - 2003/04 2004/05 2005/06 2006/07 2007/08 As PROTON moves forward and increases its catalogue of intellectual This R&D grant is part of the 4th Measure of the National Automotive properties, the licensing of such assets to third parties will become Policy (NAP) that seeks to encourage R&D activities within Malaysia, more specifically among Malaysian-based automotive manufacturers. It is revenue base. commonplace, thereby further enhancing the Group’s 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 Shipment of the first batch of the 30,000 PROTON Gen.2 units to China encouragement for PROTON to continue to advance R&D efforts in Dividends meeting the objectives of the NAP and the nation’s industrialisation In view of the need to ensure that PROTON is viably strengthened agenda. and able to achieve long-term and sustainable growth, the Board of 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 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 Developments Launch of New Products PROTON has stayed the course with its drive towards positive change. The engine of growth for any car manufacturer lies in its products. In its quest to become an efficient national carmaker, PROTON has PROTON’s single-minded approach to renew its product line-up to meet and will continue to embrace change, where change is required. The the evolving needs and requirements of the buying public resulted in Group’s commitment is reflected not only in the improvements made the roll-out of the Persona and subsequently the iconic Saga during the in its products and services but also in the continued enhancement of year under review. 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. 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 PROTON 2008 Annual Report • chairman’s statement 045 The launch of Lotus Evora at the British Motor Show The Persona is the first to embody PROTON’s philosophy of Lotus model to be launched in over 13 years. Entering the market manufacturing ‘the right car for the right market at the right time for above the Elise, Exige and Europa, this new Lotus will be available in the the right price’. The Persona has received over 50,000 in bookings as first half of 2009 and is expected to contribute positively to the at end July 2008. Lotus Group. 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 The launch of the new Saga by the Rt. Hon. Prime Minister of Malaysia 046 PROTON 2008 Annual Report • chairman’s statement Development of New Products Continuing 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. Broadening Exports The export market will be key to PROTON’s continued long-term success as a relevant and credible auto manufacturer. Given the relatively small A fleet of PROTON taxis ready for export to Iran domestic market and saturated motorisation rate, it is a given that for PROTON. PROTON is confident that the company’s entry into PROTON must look towards exports for tangible long-term growth. On the Thai automotive market will generate long-term positive results. this score, the Group will continue to be focused on the high-growth Indonesia also witnessed the launch of additional PROTON models markets of ASEAN, China, and India, while tapping opportunities in served by an increasing sales and service network. various emerging markets such as Iran, Russia and Vietnam. During the period under review, PROTON began to make further inroads 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 PROTON launch in Thailand at the Bangkok Auto Show, part of its thrust into regional markets 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. The Persona launch in Jakarta, Indonesia PROTON 2008 Annual Report • chairman’s statement 047 PROTON is now carefully studying its options with respect to the India, The dealer rationalisation programme played a significant role in Russia and Vietnam markets, which have the potential of being strong breathing new impetus among the dealer community by ensuring they export markets for PROTON. However, given the complexities of these are financially more resilient and operationally more flexible. markets, PROTON will adopt a cautious approach before committing significant resources to these markets. However, there is room for further improvement. Moving forward, PROTON would like to see the dealer community significantly improve PROTON is also cognisant that its ability to make further in-roads its service levels to rival that of other more established brands. PROTON abroad is hinged on the Group’s ability to deliver value-for-money firmly believes that improvement of the level of service among dealers products that are of acceptable quality. Brand equity can only be can help strengthen the brand image of PROTON in the long run. 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. Strengthening of Managerial Resources As 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 Rationalisation of the Vendor Network strengthen its managerial resources, particularly those that are core to The success of PROTON’s Persona and Saga is partly attributable to the the Group’s operations. 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 Network PROTON’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. 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 longterm investment for the Group. 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. Crash test facilities at PROTON are used to improve product safety By focusing on delivering products that offer value to consumers, be it in terms of quality, cost, features or customer service, PROTON will There is also now significant demand for cars that are fuel efficient position itself as a brand that meets the needs of consumers during to compensate for the rising price of petrol. Given this development, these times, when only the strong and agile will remain relevant. As PROTON is focussing efforts to ensure its future products can meet, if such, the key thrust for the coming financial year will be to continue to not surpass this expectation. In the meantime, PROTON will introduce introduce new products along the lines of PROTON’s adopted product Natural Gas Vehicles (NGVs) variants based on the existing product philosophy. 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 Sales Volume: Increasing Export Thousands DOM 45 39 40 35 30 25 33 34 28 6 24 5 21 5 20 15 10 provide a cost effective and environmentally-friendlier alternative. 23 28 16 5 5 28 4 2 7 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. 5 29 19 36 34 32 23 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 0 Q1 Q2 Q3 2006/2007 Q4 Q1 Q2 Q3 2007/2008 Q4 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. PROTON 2008 Annual Report • chairman’s statement Emphasis on Product Safety The 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. 049 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. 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 Quality The quality of PROTON’s current product range has improved significantly since the company first made its commitment to improve Tan Sri Dato’ Haji Muhyiddin Bin Mohd Yassin, Minister of International Trade and Industry, during his visit to the Shah Alam plant product quality. However, PROTON believes that there remains room Efficient Cost Management Given 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 PROTON and GIATMARA come together for the advancement of automotive training improvement and not just an incremental approach. 050 PROTON 2008 Annual Report • chairman’s statement Collaborations Prospects The fast-changing global automotive landscape demands that players PROTON’s results for this financial calendar are clear indications that the collaborate to gain further economies of scale and hasten the speed of Group has progressed and is moving in the right direction. Nonetheless, development. Those that choose to remain independent must have the the road ahead is still fraught with a multitude of challenges, even more reach, resources and scale to secure growth. Alternatively, participants so now, than ever. The effects of the significant fuel hike in June 2008 can choose to build multiple mutually beneficial alliances. have yet to fully manifest itself throughout the economy. However, with the rising cost of living impacting the buying public’s disposable 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; income, the Group expects the resurgence of the local automotive sector to experience a slight dampening in the short term. 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 PROTON is a strong brand domestically, that we have continued own, the company can utilise its limited resources more efficiently to nurture. PROTON will build on its strength and look outward for via collaborations and alliances. Collaborations and alliances can help continued growth. There are tangible and significant “low hanging PROTON achieve the desired end-state in a faster, more cost-effective fruits” in selected regions, where PROTON can leverage on its skills-set, and more efficient manner. expertise and experience to make further in-roads that will positively impact top-line and bottom-line growth for the Group. In view of this realisation, PROTON has opted to adopt mutually beneficial collaborations that are specific to its strategic and operational In this respect, the Group has identified key thrusts to succeed globally, needs, be it from a product perspective or for the purpose of which include focusing on high-growth regional markets, moving market entry. The period under review witnessed the use of towards market-driven product development for these markets, while collaborations to facilitate PROTON’s entry into the Chinese and Thai striving to achieve economies of scale. 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. 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. 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. PROTON 2008 Annual Report • chairman’s statement 051 From a holistic and realistic perspective, it will clearly take time, As always, we are grateful for the support shown by our partners – significant effort and continued support from all stakeholders for PROTON’s vendors and suppliers as well as our distribution and PROTON to achieve what it has set out to accomplish. The task is not sales teams. 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. 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 Acknowledgement On behalf of the Board of Directors, I wish to convey our sincere any car owner will truly be proud of. PROTON Group and the automotive industry could not have appreciation to PROTON’s Management, staff and employees, at all progressed over this last year if not for the guidance and levels and across the various functions, both domestic and determination of the Rt. Hon. Prime Minister, YAB Dato’ Seri international. Abdullah Haji Ahmad Badawi and the Malaysian Government through its various ministries and agencies. The success PROTON The Board is indeed appreciative of the perseverance and dedication has attained is also the result of the energy and drive of this major shown by the PROTON fraternity throughout the challenging period stakeholder. Our utmost gratitude and sincerest appreciation to YAB of the last few years. It is my hope that all those connected with Dato’ Seri and the Government. 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, 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’ 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. Dato’ Mohammed Azlan Bin Hashim Chairman 052 PROTON 2008 Annual Report PROTON 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. 053 054 PROTON 2008 Annual Report • managing director’s review Dato’ Haji Syed Zainal Abidin B Syed Mohamed Tahir Managing Director PROTON 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. ” 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. Overview 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 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. 055 056 PROTON 2008 Annual Report • managing director’s review Product The importance of ensuring we have a strong product portfolio is all the proposition to the buyers of the Savvy Lite, have successfully managed more crucial as it has a pivotal impact on our turnaround plans. This is to excite car consumers in Malaysia during the year under review. reinforced by our winning strategy of introducing ‘the right car, for the right market, at the right price and at the right time’. Staying on course, PROTON will be launching our first MPV in early 2009, further solidifying our product line-up to include a high This strategy was reflected in our newly introduced Persona and Saga quality multi-purpose vehicle that can cater to the family-oriented models, with the latter powered by the new CamPro IAFM engine contemporary lifestyle. Other exciting offerings are also in the pipeline during the year under review and suffice to note, these two models are with replacements for the Waja and iconic Perdana on the drawing board. performing tremendously well in the market to date. To sustain this positive momentum, we will continue our research and Furthermore, we have continued to update and refresh our existing development (R&D) efforts and comprehensive market surveys to product lines to entice and attract customers. The re-energised gain a deeper understanding of the needs of our customer base. By Waja and Gen.2, with their new look and powerful CamPro CPS harnessing the right technology and keeping our finger on the pulse of engine, and the economical Savvy re-designed to give better value 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 PROTON 2008 Annual Report • managing director’s review 057 Quality As 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. Signing ceremony between PROTON and NPC to enhance management of vendor development 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. 058 PROTON 2008 Annual Report • managing director’s review The Managing Director addressing the team on the Business Turnaround Plan Kick-Start Programme Overall, our efforts towards quality improvement have resulted in a more efficient procurement process. At the end, we are able to price PROTON being recognised as the most improved automotive company our cars competitively to capture a larger market share. 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. 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 Cost Efficiency in terms of cost reduction and improvement in operational efficiency, Towards this end, the year under review saw PROTON making tangible thus, positioning us as a viable automaker in the region. and significant headway in increasing component standardisation and carryover between its models. By value, the Persona/Gen.2 carryover Distribution Network is about 75%, whilst the Saga/Savvy carryover is approximately 40%. As a pro-active measure we have carried out a sales network Moving forward, we expect to continue this best practice in the consolidation exercise with the primary purpose of reinforcing our sales development of future models. distribution network and creating value for worthy distributors. 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 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. PROTON 2008 Annual Report • managing director’s review 059 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. Vendor Base Apart from strengthening our dealership network, we invested an equal amount of energy and time into strengthening our vendor The Managing Director receiving the ‘Best Model of the Year’ award for the Persona from Frost & Sullivan base through rationalisation, tiering and consolidation exercises. Our initiatives saw a decrease in the number of our direct vendors from We are fully aware that our vendors are key partners as they play a key 260 in the 2006 financial year to 200 in the year under review which role in ensuring the continued success of PROTON. To this end, we represents a reduction of 23%. What this effectively means is that increased vendor participation in the various aspects of production of PROTON now has a stronger, more structured and manageable direct PROTON cars such as design, quality and cost management, which was vendor network which is ably supported by a second tier network by further supplemented with training. virtue of the tiering system. Signing ceremony for distributorship agreement in Bangkok 060 PROTON 2008 Annual Report • managing director’s review Moving Forward Having 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 The new Saga is flagged-off of engineering. Directing our attention to the international arena, we will intensify 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. 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 Managing Director at the launch of the face-lift Gen.2 PROTON 2008 Annual Report • managing director’s review 061 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 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: Dato’ Haji Syed Zainal Abidin B Syed Mohamed Tahir • Managing Director 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. 062 PROTON 2008 Annual Report • operations review Engineering Services 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. PROTON 2008 Annual Report • operations review 063 Product Development Saga With robust product planning, we were able to introduce both new The Saga is currently the longest-surviving and most popular model and improved PROTON cars in the year under review, marked by the introduced by the Group to date, which is why, the development successful launch of the Persona in August 2007, followed closely by of the brand new Saga was such a landmark project for the the unveiling of the new Saga in January 2008. 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 The Persona 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. The new Saga 064 PROTON 2008 Annual Report • operations review Product Refreshments 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. 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 The revitalised Gen.2 release as standard features. Combined with other plush items such as leather seats and gated Gen.2 gear shifter, the re-energised Waja now offers more value than ever The face-lift of Gen.2 was done in tandem with the initiation of the to strengthen its leading position among new competitors from Japan, Persona project to take advantage of cost sharing given that both Korea and Europe. 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). The upgraded Waja PROTON 2008 Annual Report • operations review 065 Research and Development (R&D) PROTON’s state-of-the-art styling studio PROTON Virtual Reality (VR) Centre The PROTON VR Centre is a state-of-the-art visualisation facility built ‘walk through’ the entire conceptual and technical designs without for the R&D team, in the styling visualisation, engineering design and having to produce actual-sized models. 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 The launch of the VR Centre 066 PROTON 2008 Annual Report • operations review Functions of the VR Centre include: • enhancing quality control between peers and managers as the • providing a collaborative work environment between users from Centre is able to undertake digital mock-up, finite dimensional and tolerance sessions; and different fields of expertise; • enabling video conferencing between PROTON and our technology • providing a platform as a training centre and knowledge-sharing partners to review design and discuss engineering dynamics; facility. • providing a platform for high-level management presentations and forums; 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. “ 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! ” Ian Maxwell (left) General Manager Lotus Engineering Malaysia “ 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. ” Robert L. Hall Special Projects in Managing Director’s Office PROTON 2008 Annual Report • operations review 067 • 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 PROTON’s Component, Material, Safety and Strength (CMSS) laboratory manufacturers for their vehicle validation. “ As a Malaysian I’m proud to support Malaysian-made cars. PROTON cars are stylish, 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 Waja and Saga owner comfortable and affordable. Revenue Generation via R&D 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; A vehicle undergoing a crash test Al-Zulfadly 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 and time fuel injection accurately into the engine cylinder, depending PROTON, PETRONAS and selected local universities. on the requirements of power and speed. The CNG DI system is a monofuel direct injection system that runs on The system enables a car to be driven by using only natural gas. compressed natural gas or CNG utilising a direct injection method into Additionally, the use of direct injection technology will ensure that the combustion chamber at relatively high pressure. This fuel system is power and performance are equivalent to a similar car using petrol. controlled by an electronic controller unit (ECU) that can synchronise PROTON 2008 Annual Report • operations review 069 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. Technical Enhancement In 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. PROTON’s Semi-High Speed Test Track in Shah Alam The year under review saw a total of 51 engineers from Vehicle This working and training initiative had resulted in: Engineering and Production Engineering being sent to Korea, for • A 40% engineering involvement in terms of styling, engineering a joint development initiative for a multi-purpose vehicle (MPV). 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. 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. PROTON 2008 Annual Report 071 • operations review Total production volume during the year was recorded at 132,464 By the end of the year under review, total monthly production volume units representing an increase of 26% over the previous financial year. reached an average of 13,000 units per month, with two of our main Out of this, 66,935 units were produced by our plant at Shah Alam, plants in Shah Alam and Tanjung Malim running two shifts. 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. 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 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 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. discontinued in July 2007 and November 2007 respectively to make way for new model introductions. “ 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 Alam Our Shah Alam plant comprises both the main plant and the MVF. The The plant in Shah Alam achieved significant quality improvements in combined total installed capacity for both these plants is 200,000 units conjunction with the introduction of the new Saga. Quality gates were per annum. In addition, the casting, engine and transmission plant, implemented on line to ensure defects are discovered and rectified which is also located within the Shah Alam facility, has the capacity to immediately. Comprehensive online training was also carried out and produce 180,000 units of CamPro engines per year. our quality improvement teams are on-hand to ensure that high quality levels are adhered to. Today, all vehicles produced in this plant are 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 required to have running tests on a special route to eliminate any remaining quality issues. 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 Meanwhile, the MVF started the production of the new Waja CPS in produce more than 8,000 vehicles per month and we expect this to January 2008 with production volume around 1,300 units a month. In be achieved by September 2008. the current financial year, the Waja CPS production will be transferred to the main plant to make way for the new MPV. 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. Main building of the PROTON plant in Shah Alam PROTON 2008 Annual Report • operations review 073 The Tanjung Malim plant PROTON Tanjung Malim PROTON Tanjung Malim is the latest and the most sophisticated market, and coupled with plans to export the car overseas, the monthly manufacturing and assembly plant within the PROTON Group. production volume for the Persona has been increased to 6,000 units It produces the Gen.2, Persona, Satria Neo and Savvy. a month to date. The plant operates on an Automatic Line Control (ALC) system to track We expect the combined demand for the Persona and Gen.2 to vehicles and broadcast real-time information to the nearby vendor reach 100,000 units in the current financial year. In order to ensure community for parts supply-delivery scheduling. This is to ensure that the plant is able to meet demand, various upgrading initiatives an efficient and effective logistics network can be run by third party of its facilities, equipment and engineering processes have been logistics service providers. The plant has a production capacity of implemented at the plant as well as among our main vendors. 150,000 units per annum working on a two-shift basis. Concurrently, preparation work for the left hand drive (LHD) market for 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 the face-lift Gen.2 and Persona is being carried out and is expected to be ready by August 2008. 074 PROTON 2008 Annual Report • operations review PROTON Cikarang, Indonesia PT Proton Tracoma Motors was renamed PT Proton Cikarang Indonesia Being primarily involved in the manufacturing, assembly, sales and following PROTON Group’s successful completion of the acquisition distribution of motor vehicles in the Indonesian as well as ASEAN of the remaining 49% equity interest in the Company from Tracoma markets, PT Proton Cikarang is currently undertaking the re-painting Holdings Berhad during the year under review. 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. “ 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 PROTON 2008 Annual Report • operations review 075 Prospects Production volume for the new financial year is forecasted to increase Meanwhile, PROTON also expects the demand for the CamPro engine to by 55%, to reach a total production volume of 205,000 units. The be significantly higher this year. As such, the CamPro engine component domestic market will take up approximately 75% of this volume, while machining and assembly capacity from casting to machining to final the remaining 25% is reserved for PROTON’s export markets. This assembly have been reviewed with the view to increase the current production level will utilise almost 60% of PROTON’s installed plant capacity. installed capacity of 180,000 units to 250,000 units a year. 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. 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 Lotus Operations In tandem with our overall improved performance, Lotus, a subsidiary During the year, Lotus successfully introduced three new market- of PROTON, recorded a significant turnaround during the year under driven refreshments of its product line-up, namely the Elise review and is well-poised for further growth ahead. SC220, Exige 240 and Cup 260. The positive response to the offerings enabled Lotus to bolster its performance during the year. Following its successful recapitalisation exercise undertaken in the previous financial year, which resulted in a strengthened balance sheet, In the year under review, we also saw Lotus making further Lotus leveraged on its position as a niche manufacturer of sports cars in-roads into the global marketplace by successfully opening sales and its leading expertise in high-technology engineering consultancy to outlets in Malaysia, South Korea, Thailand and Estonia. The expanded drive profitability. reach should translate into better access, thereby generating improved 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. “ excitement that you’re looking for, then PROTON is the place to be in. I’ve been with PROTON for more Edward Tan Yu Tho 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. If it’s a life of constant challenges and than 11 years, and I’ve enjoyed every moment. sales for the brand in the near future. ” Manager, Marketing & Operations, Lotus Cars Malaysia PROTON 2008 Annual Report • operations review 077 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. The Lotus Evora Lotus has also unveiled the first all-new sports car in 13 years. The As a result, US-based Lotus Engineering Inc registered record profits Evora, a 2+2 mid-engine V6 model, is expected to see its first delivery during the year, while Lotus Engineering Malaysia recorded a positive to customers beginning April 2009. turnaround. Overseas expansion included the setting-up of a sales office in Japan and a subsidiary in China. Lotus foresees growth in the engineering consultancy business particularly in fast-developing countries like China and India. Hence, The year was also marked by the successful roll-out of the Europestar the Group plans to build on its know-how and track record to tap this in China as a result of a collaboration between the Youngman Group growth market. 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. The elegant interior of the Lotus Evora 078 PROTON 2008 Annual Report • operations review Quality Management Quality improvement is an integral part of PROTON’s development 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 PROTON 2008 Annual Report • operations review 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 Inspection standards were enchanced to ensure quality improves 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%. “ 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 079 080 PROTON 2008 Annual Report • operations review Market Quality Quality is about customer satisfaction and meeting customers’ since the Persona and new Saga were introduced into the market, expectations. It is indeed challenging, to say the least, to improve customer complaints have reduced significantly and quality perception quality in the market given the ever-changing expectations and quality for PROTON products has greatly improved as reflected in the notable perception among car buyers today. improvements in the CPC and DPU levels. As such, the key to improving quality in the market is to understand the Additionally, from the market feedback gauged via warranty provisions needs and perceptions of our customers. Towards this end, the Group and Product Quality Report (distributors’ feedback), we have recorded established a ‘Voice of Customer’ framework to facilitate feedback remarkable improvements that reflect PROTON’s strong commitment on quality issues from the market. This is vital in order to establish to satisfying our customers’ needs. 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. Manufacturing Quality In order to further enhance manufacturing of PROTON cars, we During the year under review, a new feedback mechanism called must approach quality from a different perspective. PROTON must Customer Priority Index (CPI) was introduced with the aim to help drive endeavour for quality excellence by emphasising prevention rather 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, 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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