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Tuesday, December 09, 2008

Win-win for Proton-Mitsubishi?

A win-win relationship is a worn out cliche but somehow it rings true in the reconciliation between Proton Holdings Bhd and Mitsubishi Motors Corp.

Announcing the product-collaboration deal last Friday, Proton said both parties had signed agreements that will lead to Proton rebadging a Mitsubishi to replace the Waja, Mitsubishi rebadging a Proton for markets Proton is not involved in and they will jointly build a new Proton car.

The deal, also, indirectly spelt out the availability of Mitsubishi technology to Proton, help from Mitsubishi to upgrade Proton’s quality and the expansion of Mitsubishi into South-East Asia using Proton as a base.

At first glance, the deal is a winner as it offers not only the tangible benefits of more models and high sales when economic conditions improve, but also addresses some of the intangibles within Proton.

It also comes at little cost to Proton as it does not have to give up equity in the company while still getting the benefits a strategic equity-based partnership would have delivered.

The deal comes at a time when sales of cars globally are slowing. The credit crunch induced global recession is seeing car companies suffer such a steep drop in sales that some of the biggest names, most notably from Detroit, are fighting for survival.

Such a backdrop might have played into Proton’s hands as the relationship with Mitsubishi, which would have been more unlikely should economic conditions had been the reverse of its terrible state now, offers it a chance to take stock of its own processes and strengths and to see how it can re-position itself once economic conditions recover.

The immediate benefit for Proton would be in sales and helping to push volumes up would be the Waja replacement model.

The now tired looking Waja has been a money maker for Proton throughout this decade and getting a new car in this C-class segment is critical for Proton, especially as it takes on the more entrenched Japanese models in the country.

Furthermore, a Waja with a Mitsubishi DNA would be a valuable commodity for Proton as it would gain additional credibility in markets in South-East Asia, and possibly in the Middle Eastern markets where Proton is trying to make a name.

Quality has been a major issue for Proton for years and although the company has made significant improvement in this aspect, such as addressing the infamous dodgy power windows, there is still room for enhancement.

Proton has hired a German with experience at BMW to spearhead the quality improvement, but having Mitsubishi in the frontline working on improving the quality of the models that the companies would be jointly involved in would be a big boost for Proton.

Another spin-off from the product collaboration might be the use of Proton’s plants as a base for Mitsubishi models into South-East Asia.

At the moment, Mitsubishi cars are mainly imported as CBU units into the Asean market and having an assembly/manufacturing operations at Proton’s Tanjung Malim plant, where there is ample capacity, would allow Mitsubishi cars to be sold at cheaper prices in this region.

The deal also has an engineering services agreement. Here, Proton, which already has Lotus for some aspects of engineering skills, would utilise and likely pay Mitsubishi for engineering services towards the development on a new Proton model.
PROTON : [Stock Watch] [News]
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What is the main factor for you to buy a Proton Car?
Low price and no other choice due to budget
Good resale value
Low maintenance cost
Ride & Handling is good
Reliable parts, chasis and engine
Good Styling exterior & Interior
Patriotism (I support Made in Malaysia Products)
Follow others (Follow Majorities should be the best choice)