This article first appeared in Corporate, The Edge Malaysia Weekly, on April 18 - 24, 2016.

FORMER Proton Holdings Bhd chairman Tun Dr Mahathir Mohamad is known for his quick wit and sarcasm. And he has not lost any of it despite being disparaged recently. Here is an excerpt of his interview with The Edge last week.

The Edge: Thank you for granting us this interview, Tun. Could you tell us why you resigned from Proton?

Tun Dr Mahathir Mohamad: Many people associated with me have been investigated and harassed by government agencies. They are trying to find out whether I have shares in this company … Obviously, anybody associated with me will be subjected to harassment and maybe more than that. So, I decided that my presence on the board could have a very bad effect on Proton. So, I think it is better if I resign and disassociate myself from Proton.

Is your resignation from Proton one of the conditions for a soft loan?

No, it was never a condition for the loan. This loan was not made under the present management. It was made under the previous management, which was almost 8 to 10 years ago. And the money has never been given. To say that the money would be given if Proton does this and that, we don’t believe it. I don’t believe it. I don’t think anything that Proton does can result in the government giving money because even for an R&D grant, the government promised us RM120 million if we produced hybrid and electric cars. This we have done but still no money is forthcoming. This is separate from the RM1.5 billion, this is an R&D grant, which is given to every company. We have not been given any money at all but to say that we don’t do what we are supposed to do — we have done. We have produced an electric car, we have produced a hybrid car, but these cars need to be subsidised in all countries because the cost of the battery is very high. Sometimes, the cost of the battery is the same as the cost of the car. So without subsidy, we cannot sell.

When you started Proton more than 30 years ago, how did you imagine it to be? Did you imagine it to be like this?

I didn’t imagine it would be like this. Every country, when they get into the automotive industry, they protect the industry. They protect it in many ways, sometimes through taxes, sometime through non-tax conditions. Even now, we find many countries, including developed countries such as Germany, South Korea and China, they all have some kind of protection such as standards, compliance with certain things and so on, which resulted in Proton not being able to sell any car in Japan, Korea, China and Germany. They say we don’t meet their standards. But car makers from those countries can come into Malaysia freely, they have now taken 52% of the local market. We cannot sell even a single car in their country because they say you must do this, you must invest this much money, all kinds of conditions, which are non-tax conditions imposed if we want to export our cars to their country.

Do you think the RM1.5 billion soft loan can turn Proton around?

Well, under the present condition, yes, but we would have been able to turn around earlier. Proton car sales today have plummeted unusually because normally, we sell about 4,000 cars a week. It came down to 2,000 cars a week, which we can still survive on. This month, it came down to 200 cars a week. We don’t understand why. The cars are the same, people are still test-driving the cars, but we still cannot sell. We don’t know what the reasons are. I can understand the perception but the perception was based on something that was found in the old cars, like the power window problem. All the defects that were there before have been corrected, and the new cars are not at all like the old cars. They perform very well. So, something is happening, which we don’t understand. Do Malaysians want to see Proton go bankrupt? I don’t know. Because if we sell 5,000 cars a month, we will go bankrupt. Without the RM1.5 billion, we can still sustain if we can sell between 8,000 and 10,000 cars a month; we could break even. But going down to 200 cars a week is something incredible. We can’t understand it at all.

Do you think maybe consumers want better cars?

Well, normally they say that the cars are bad but we countered that by saying this is not the old car, this is a new car, it performs well. Bring them, ask them to drive and they all say the car is good, but nobody is buying, as if they are afraid to buy a Proton, we don’t know why. We can’t understand it but this is what is happening.

What have been the difficulties in getting a strategic partner? Because Perodua has done quite well largely with Toyota as a partner.

No, Toyota is not Perodua’s partner. It is owned by the Japanese. Over 50% is owned by the Japanese and now Toyota has taken over Daihatsu. So, all the time, it was a Toyota car. That is different. All the technology, all the expertise comes from Toyota. We worked with Mitsubishi and then we decided to part because Mitsubishi was having problems and they had to wind down some investments. But as far as technology is concerned, we get it from Honda. This is an agreement with Honda, we can use their technology. Now, we have Suzuki. In addition to that, we have a company in Czech Republic called Evektor, and Evektor is responsible for the production of Skoda. So, we have inputs from these people. In addition, we have Lotus. So, you see a lot of technology is coming not from one company but from several. We can tap them, we can ask them to help with the design and all that, and we share a lot of things.

Volkswagen wanted to take up Proton, own it and run it, then it would no longer be a national car. When it had acquired a stake in Suzuki, Volkswagen wanted to take control of Suzuki, and they quarrelled. The German companies, they want to have control and make it their own. The name can be retained, you can call it Proton, but it is not our car. But if you want to give up our national car, then sell it. That is what our partners want.

But that seems to be the government’s intention, if you look at Miti’s statement that Perodua’s business model is more sustainable. So, how do you feel about that?

Perodua belongs to the Japanese, it is a Japanese company, 51%-owned by the Japanese. If you want that, okay, we can sell off Proton and forget about acquiring our own technology. Ever since the founding of Proton, people have learnt engineering and they have gone on to set up their own engineering businesses. They were trained in Proton, they left and if you look around, many of the companies have ex-Proton engineers working for them. We trained them, they are good. And we have vendors, and the vendors, of course, contribute, also have technology. But if you don’t want to have any engineering capabilities in this country, by all means, sell the company to foreigners. We become consumers. And you know what it means by being a consumer? It means money will flow out of this country. Billions, lots of money. If you want that amount of money to flow out, okay. Money is flowing out because people are closing their factories here and moving to other countries. We are losing out, about RM40 billion gone. So if you want that, it is all right. You become a consumer country with little technology, and if you are very proud of being a consumer, by all means, sell Proton, or take a partner that will take over the whole company.

The government and Proton’s management somehow never seem to be on the same page. Any idea why it has been like that?

The government has a different agenda, we have a different agenda. The first agenda was to create a national automotive industry. After I stepped down, the automotive industry, engineering, high-tech and all that, not considered good for Malaysia, they went into agriculture. Under Pak Lah, you plant vegetables behind your house — that was our progress. Now under Datuk Seri Najib, he wants to please consumers. To produce cheap cars, RM25,000 cars, he announced that. Cheap cars cannot be good cars. If you want, even India cannot produce cheap cars. US$10,000 is about RM38,000, that is not cheap. Ours, we can sell at RM33,000. The cheapest car is actually the Saga. It is so cheap that it is beyond belief. We made very tiny margins. Slight mistake only, we lose money. We need a big margin, but we can’t have a big margin when foreign cars are coming in and competing with us.

Would it be accurate to say then that Proton’s main problem is the government?

(Laughs) The government is one of the problems lah … We have changed completely the idea about producing cars. You may see the Lancer being labelled a Proton (Inspira). We changed the front and back, we called it Proton. The previous Perdana again, we take a Mistubishi car and you put your label. Now we don’t want that. Yes, we bought the platform and maybe the engine. The rest is ours. The car that we have built, which I’m told will be launched at the end of this month, is entirely, completely different from the Honda car. The first one that we produced was along the whole perception of things. We changed the front and the back and they called it the Perdana. But now, it is not like that. All cars are designed by ourselves and prototyped, produced, tested, everything is done. Well, it was my idea actually to start an automotive industry. I was very unhappy when they relied so much on foreign input. Just take a foreign car and put our label on it; that is not a national automotive industry.

The sales of the last few models, such as the Iriz and Suprima S, are below target. Did Proton learn anything from those experiences now that it is launching a new model?

What we learnt is that we cannot compete with Perodua. Some people keep harping on the windows not being able to wind down. It is not like that anymore. These are cars that are built with electronic components. About 200 different little computers are in the car. A lot of changes, there are more than 100 changes that have been put in place, besides the shape of the car. So, these are not the old Proton cars. These are electronic and they follow the trend, they can perform like others. I don’t understand why the Iriz and Suprima still don’t get traction among local buyers. 

Do you agree with Datuk Seri Mustapa Mohamed’s statement that it is a mistake for Proton to have two plants?

The initial idea was that we want only one plant, and that plant should be in Tanjung Malim. But moving production from Shah Alam to Tanjung Malim involves people, and the workers do not want to go there. Now, we are planning to have housing for them, but even then, they don’t like to go to Tanjung Malim because it is far from town. We think that if the government connects the highway to Tanjung Malim, then it would reduce travel time and if they put in a gas pipeline, Proton would be able to do well in Tanjung Malim. We don’t want to have two plants, we want to close down this plant [in Shah Alam]. But you can’t just close down. A lot of people depend on this plant, so if a lot of people resign, we can’t produce anything.

What do think about Mustapa’s statement about Proton?

I think he didn’t know. He has a lot of things to think about but his knowledge about the automotive industry, its finances, the way it works, the people who are dependent on the automotive industry, I think it is limited.

Do you think the government should buy into Proton again?

No, I don’t think so because government interference was what … you know the last time Proton was held by the government, the whole focus was on how to get rid of Tengku Mahaleel. Tengku Mahaleel was the one who built up Proton, was able to save RM4 billion, and to build the Tanjung Malim factory without borrowing. But the government’s intention was, how do we get rid of this man? So he was kicked out, you offered him pay which was lower than what he was getting. He cannot accept that pay, so he was kicked out.

Sounds like these are desperate times for Proton. Is it time to take more drastic measures? 

The most important thing is to sell the cars. As far as technology is concerned, we have upgraded ourselves and our way of producing things has improved so much that before, Proton took three years to produce one model. This year, they will launch three models in one year, maybe even four models in one year. That is how they have reduced time, and costs. It used to cost RM600 million to RM800 million to produce one model; we now produce three new models for RM600 million.

But if people don’t want to buy because it is Proton, so you give us RM1.5 billion or RM300 billion or whatever, it doesn’t make any difference. You produce something that people don’t want to buy, it is not the capital that is important. 

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