Economics might finally be winning in its fight after over 25 years with Proton, a small Malaysian carmaker whose very continued existence is a direct affront to the academic discipline. The end finally appears near for the pet project of former Prime Minister Mahathir Mohamed and source of national pride for Malaysia. Less than one month from now, in January 2008, new tariff laws will take effect for Proton and Malaysia, a founding member country of the Association of Southeast Asian Nations (ASEAN) under the Asian Free Trade Agreement (AFTA), which calls for dramatically reduced tariff protection among member countries. Almost everyone involved in the automotive industry, including officials at Proton, expect that Proton will be unable to continue on as a viable enterprise under its existing operating structure.
[...] Eventually, Proton grew into a full scale car manufacturer with the help of Mitsubishi, which owns about 15% of Proton, Lotus Technology, and other outside influences. Proton acquired English sports car maker Lotus in 1996, which greatly improved its design division, as well as injecting some modern technologies into the company. One thing about the company has remained the same throughout the years, which is that Proton has always remained controlled by the Malaysia government, which essentially meant Mohamed for the 22 years leading up to 2003. [...]
[...] The Economist (2007, May 28). Bailout alert in Malaysia. Asia Sentinel (2006, December 6). Country briefing: Malaysia. Political forces: a federal constitutional monarchy. The Economist Intelligence Report (2006, November 30). Malaysia's crisis-ridden national carmaker faces a stark choice. The Economist (2005, August 25). Failing to spread the wealth. The Economist Burton, John Proton ends partnership talks. (2007, November 21). The Financial Times Heong, Chee Yoke (2003, August 26). Malaysia's Proton struggles on. Asia Times Ming, Siow Chen Corporate Malaysia: Could Proton have got a better price? [...]
[...] They are the Saga, Perdana, Wira, Savvy, Satria Nira, Waja, and the newest model, the Gen.2, all manufactured in Malaysia by a workforce of almost 11,000 employees. Of those the Wira sold the most models, with 15,687 units sold, followed by the Waja and the Gen.2. The Wira has been the company's best-selling car for five consecutive years. Proton has a research and development facility in England that is associated with subsidiary Lotus and also one manufacturing plant in Malaysia. [...]
[...] Proton has far too often chosen the wrong answer when answering economics questions concerning basic economic principles, including failing to take advantage of economies of scale, the Mill and Bastable tests, combinatory growth processes, comparative advantage, constrained labor markets, import substitution, increasing returns to scale, Lerner symmetry theorem, median voter model, and many other issues in economics. In the face of such odds, it is not surprising that Proton is headed for either a downfall or a major restructuring, but rather that it lasted so long the way it was. [...]
[...] After 15 months and 70 million euros invested in the company, Proton Holdings ended up selling their stake of the company for exactly one euro, a token payment in a deal where the new owner assumes the debt and operating expenses of the firm. Many analysts have questioned aspects of the deal, including where the money invested in the company in the 15 months they controlled it went and whether Proton Holdings could have gotten more than one euro for the company if they had accepted competitive bids for the firm before they committed to selling it to the Italian firm (Ming 2006). [...]
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