Malaysia Drives For Auto Exports
IN SOUTH KOREA'S FOOTSTEPS?
KUALA LUMPUR, MALAYSIA
A NEW engine of Malaysia's economy may be off and running after some cold starts. This engine is literally just that - an auto engine. After five years, the Proton Saga is gearing up for the world of global auto exports. Its outcome is certain to have repercussions at home and beyond Malaysian borders. Like South Korea, Malaysia and other Asian countries hope to partially duplicate Japan's success in the auto business.
Three other factors led to Malaysia's decision to take the auto route. The goal of modernization was a cornerstone of Prime Minister Mahathir Mohamad's policies. Another tenet was creation of an indigenous business sector, one dominated by ethnic Malays (bumiputras) rather than Chinese Malaysians. Third, during the mid-1980s a ``Look East'' policy saw shifts away from commercial and cultural links with the West. Japan was favored as a source of technological investments.
In 1985, plans were finalized for the auto push: A blend of Mitsubishi design plus Japanese capital. Proton was born. The name derives from the phrase for national auto corporation, Perusahan Otomobil Nasional.
The Saga's own saga has been characterized by uncertainty. Early on, Malaysia's hopes were raised after Hyundai's initial successes in the North American market. In 1986, the Korean automaker projected sales of 5,000 units in Canada, yet nearly five times that number were sold. Another East Asian neighbor, Taiwan, lobbied unsuccessfully for the United States to allow 25,000 Yue Loongs - essentially Ford clones - to be imported.
Auto export enthusiasm was running high, as even Thailand received blueprints for its Japanese motor vehicle assembly plants.
The US was a prime destination for the Malaysian car maker. By 1987, according to sources at the Florida state government, contracts were signed with coastal ports to import as many as 80,000 Sagas. Sales of the cars at home were falling off. Nonetheless, its sale of 42,000 units in 1986 represented nearly 70 percent of the Malaysian car market that year.
Meanwhile, Malaysian authorities contracted Marshall Bricklin, known for his efforts to push the Yugo, to promote and seek dealerships for the Saga in the American market.
Protracted recession continued in Malaysia, and the yen appreciation hurt financial statements. The main Shah Alam plant laid off part of its work force. Sales shrunk to 38,000 in 1988, or half the amount seen in 1985. Exports to the European Community were moribund. The scope of the Saga export plan to America was scaled down and delayed. Indeed, the car has not yet been exported to the US.
Heavy deficits mounted. Government subsidies surpassed the $1,000-per-unit level. Emission and other standards limited chances of the model's entry to Canada, as well as the US.
In 1989, major changes took place. Repositioning the vehicle was among them. Proton executives felt that a higher-end compact would fill a void as producers such as Nissan and Honda moved upscale. Ties to Mitsubishi were redefined. ``More Japanese expertise will come out of a new management restructuring,'' according to Muhammad Nadzmi Muhammad Ismail, marketing director. Less emphasis on pure bumiputra control will result.
An assault on the British market began last year, with over 4,000 vehicles sold in the first month of introduction. This is four times Hyundai's sales level in over a year of availability during 1983-84, according to the Malaysian Automotive Federation.
With prices in the $9,000 to $12,000 range, Proton United Kingdom sales are forecast at 10,000 models this year. Sales for the Malaysian market are seen at reaching 10 times that number.
``General improvement in many economic sectors'' assures purchases at home, says Dr. Gatum Kaji, an Asian regional director of the World Bank. This relatively affluent nation is often referred to as ``the next NIC'' (newly-industrializing country).
Proton's recent financial gains, though modest - and say some, borne of modified accounting procedures - may indicate a long-term turnaround.