The Auto Writer

Read most of the automotive blogs and you’ll be under the distinct impression that General Motors is on life support. Though I most certainly won’t play down the company’s multi-billion dollar losses of the past few years, I believe the automaker is heading in the right direction.

Most of the losses GM is experiencing can be attributed to just one market — the US. Of course, this happens to be the automaker’s largest market where the company sells one-third of its vehicles and derives most of its profits. However, the automaker is doing quite well elsewhere particularly in China where it is one of the largest manufacturers. Buick, for example, sells twice the number of vehicles in China as it does in the US; clearly, you have to look beyond the American market to understand GM.

Proton: 25 Years of Automotive Building

One of the newest global automakers is Proton, a company that got its start in Malaysia in 1983.1 Though the brand isn’t exported to the Americas, Proton has a fairly significant presence outside of its southeastern Asia base with cars sold in the UK, Australia, South Africa, and in the Middle East. Thanks to plenty of help from Mitsubishi Motors the auto maker got its start, but today the company is fairly independent and building some models without foreign assistance.

During the 1990s Proton acquired controlling interest in Lotus2 followed by its 2004 investment in MV Agusta, the Italian motorcycle manufacturer, but sold off their shares of the latter one year later.3

Proton Enters China

In 2007, Proton inked a deal with China’s Youngman Automobile Sales Co Ltd and Youngman Automobile Group Ltd Company to export 30,000 Proton vehicles to China.4 These vehicles are being sold in China under Youngman’s EuropeStar brand, a move that allows Youngman to license engine technology and receive spare parts. Proton’s deal with Youngman allowed the automaker to re-enter the highly competitive Chinese market, having withdrawn earlier under stiff competition.

Aborted Automotive Alliances

Though Proton has remained independent throughout its 25-year history, the company has held discussions with General Motors and Volkswagen in the past in a bid to seek out alliances. Given the highly competitive nature of the automobile industry, some sort of business arrangement with other manufacturers makes sense. Unfortunately for Proton, none of the discussions has resulted in an agreement.

Reports from Malaysia’s National News Agency, Bernama.com, are indicating that General Motors is showing interest in reopening talks with Proton as the company seeks to expand its presence in southeastern Asia. GM recently announced a $445 million diesel engine plant investment in neighboring Thailand and, according to Stephen K. Carlisle, President of Southeast Asia Operations for General Motors, the company is always looking at expanding its opportunities in the region despite GM’s current financial condition.5

Proton And General Motors: This One Makes Sense

A GM-Proton alliance would make good strategic sense for both companies in that:

• The diesel engine plant in nearby Thailand could supply some of the powerplants for a Proton built model in Malaysia. This car could serve  the region and be exported for sale internationally through Proton’s existing network.
• Though Proton has seen a sharp drop in sales of late, the automaker is poised to serve emerging markets including Vietnam, a toehold that GM would welcome.
• GM is in the process of extracting itself from Hummer and possibly some other business relationships. Having a producer of small cars as a partner will allow the company to strengthen its presence in China and India, even possibly providing a small car for the Americas.

Whereas Proton cut off negotiations in the past, new market realities may force that automaker to aggressively seek an alliance in a bid to ensure its long term survival. Global automotive capacity is higher than demand, putting pressure on all automakers to work more efficiently and to price their products competitively.

We’ll be keeping an eye on this story as it develops, sharing with you what we know as the news is made available.

References

1 (2008). About Proton. Retrieved August 13, 2008, from Proton Berhad Web site: http://www.proton.com/about_proton/history/index.php

2 Press Release, (1996, October 30). Lotus Purchased by Proton. Retrieved August 13, 2008, from Sands Mechanical Museum Web site: http://www.sandsmuseum.com/cars/elise/information/press/press/press1996/reuter.html

3 Paukert, Chris (2005 December 28). Proton sells controlling stake in MV Agusta for one dollar. Retrieved August 13, 2008, from Autoblog Web site: http://www.autoblog.com/2005/12/28/proton-sells-controlling-stake-in-mv-agusta-for-one-dollar/

4 (2007 July 13). Proton Secures Deal With China’s Automaker. Retrieved August 13, 2008, from Bernama.com Web site: http://www.bernama.com/bernama/v3/news_lite.php?id=273089

5 D. Arul, Rajoo (2008, August 13). GM Ready To Re-start Talks With Proton. Retrieved August 13, 2008, from Malaysian National News Agency: Bermana Web site: http://www.bernama.com.my/bernama/v3/news_business.php?id=352569