Innovation in Motion - ChartNexus

PROTON Holdings Berhad (Company No.623177-A)

PROTON ANNUAL REPORT 2009Success. Challenges. Responsibility.

Innovation in Motion


The essence of PROTON lies in its cars. With the Group striving to reach new heights with the right car, for

the right market, at the right price and at the right time, PROTON is truly Malaysian ‘Innovation in Motion’

with global presence. By constantly innovating itself, PROTON continues to build a presence in domestic

and international markets.

EVORA – the first new model to be introduced by LOTUS in 13 years, was unveiled at the British

Motorshow in July 2008 to rave reviews from the foreign media.

EXORA – the country’s first homegrown MPV, was officiated by Prime Minister YAB Dato’ Sri Mohd Najib

Bin Tun Abdul Razak in the presence of ‘Bapa PROTON’ Tun Dr Mahathir Mohamad.

United Arab Emirates

Oman

Yemen

SAUDIARABIA

SOUTHAFRICA

MAURITIUS

SYRIA

TURKEY

UNITEDKINGDOM

EGYPTIRAQ

IRAN

BANGLADESH

CHINA

Qatar

Kingdom of Bahrain

LebanonCyprus

Cairo

AUSTRALIA

INDONESIA

SINGAPORE

MALAYSIA

TAIWAN

BRUNEI

THAILAND

1PROTON 2009 ANNUAL REPORT

PROTON is synonymous with building cars and mobilising Malaysians. It has brought the country forward by leaps and bounds in the automobile industry. From our first ever production, the Saga, to the latest launch of the Exora - Malaysia’s first home-grown MPV, the brand has indeed been faithfully planning, designing, and manufacturing cars with Malaysians’ needs and wants in mind.

At PROTON, it is our vision to become Asia’s premier automotive brand; a brand that connects with people and provides products which become life companions.

PROTON has a unique ability to understand people’s needs and provide the right product with efficient service and genuine quality. We build cars with care for passenger safety and genuine quality in order to provide high durability and lifelong companionship. Our wide portfolio ensures that we meet smart personality needs in terms of design, power and size for different age groups so PROTON can be the right companion for life.

It is an integral part of our business and our brand, without which, we would not have either share of market or share of heart.

1985 marked a momentous year in Malaysia’s history – it was the year in which the country’s first national car was born.

Today, PROTON has emerged as the only full-fledged car manufacturer in the country. PROTON’s current line-up includes the Saga, Iswara, Wira, Satria, Perdana, Putra, Satria GTi, Juara, Waja, Arena (Jumbuck), Gen.2, Savvy, Satria Neo, Persona and our very latest, the Exora.

PROTON not only commands a substantial share of the domestic market for passenger cars, but over the years we have also been building distribution networks in key market centres across the four regions of South East Asia, the Middle East, United Kingdom/Western Europe and Australia, where PROTON has become a hit with many car buyers.

The imperative factor for success lies in the people and the products. PROTON employs a brand philosophy that spells out Companionship.

PROTON’s core values of Companionship are in the areas of placing customers first, even before profits. Customer satisfaction and lifelong relationships stay at the heart of our organisation. At PROTON, we nurture the power of humanity. Our attitude remains humble, approachable and thoughtful. Togetherness and Teamwork make us stronger, better and more proactive. We work towards creating a unique bond between our staff, customers and our product promise – “Life Companion”.

PROTON constantly strives for manufacturing excellence and continuous quality improvements, while introducing cost reduction initiatives and vendor rationalisation plans to become a more dynamic and competitive car manufacturer.

Today, we are able to differentiate ourselves from the others, stand out from the competition, influence customers’ purchase decision, build customer loyalty and as a result boost the company’s financial performance, image and brand.

A Life Companion

2

Corporate Mantra & Core Values

The PROTON Way

PROTON employees are dedicated to the Group’s long-term success. Every PROTON employee shall operate under the Group’s shared values and rely on these values to guide their behaviour with each other and the customers. These values form the foundation of how we work and conduct business.


Corporate Mantra & Core Values

Customer FocusCustomers are the source of our income. We deliver

on our promises to our customers’ satisfaction.

SpeedWe have a “can-do” attitude and will not rest until

the problem is solved. We have an inherent sense

of urgency in everything we do.

InnovationWe challenge convention, always seeking new and

better ways of doing things. We view change as

opportunity.

CaringAs a responsible corporate citizen, we invest in safety,

health and the environment.

QualityWe make products that work the first time, every

time.

TeamworkWe trust, respect and share knowledge to foster

teamwork at the workplace.

Core Values

Audacious GoalDriving Malaysia’s transformation into a leader in

technology and quality.

Vivid DescriptionWe deliver innovative and superior quality products

and services. Our brands inspire confidence and pride.

PurposeWe are a passionate group of people working

together, creating exhilarating products and services

for global markets, synonymous with great styling,

innovation and leading technology.

Core Ideology

4

PROTON’s Policies

Environmental, Health and Safety PolicyThe Company’s mission is to strive towards excellence

in all aspects of PROTON’s operations. In achieving

our goal, it is necessary to promote and protect the

health and safety of PROTON employees and ensure

that the environment is unharmed.

The Group is committed to providing a conducive,

safe and healthy working environment for our

employees and to ensure this, it is our policy to:-

• Take responsibility for the safety and health of

our employees;

• Provide the appropriate resources;

• Take all action necessary to remedy any non-

compliance;

• Monitor and maintain high standards in

environmental protection as well as health and

safety measures.

In implementing the Company’s policy, we shall,

where reasonably practicable:-

• Comply with all rules and regulations concerning

the environment, health and safety;

• Provide all the necessary facilities and equipment

for the employees;

• Actively promote programmes for the employees

to instill awareness for the safety and health of the

employees, our business associates and the

public;

• Provide adequate information and assistance

to our employees and our neighbours to avoid

unacceptable effects on the environment.

To assist the Company in achieving our goals, we

shall work together and towards this end, employees

shall:-

• Abide by all rules and regulations concerning the

workplace;

• Utilise all the facilities provided by the

management in a safe and proper manner;

• Maintain good work practices;

• Actively participate in all the Environmental,

Health and Safety (EHS) programmes.

This is our objective and it is our intention to put

this EHS Policy into action and to make it our way

of life.

Environment, health and safety are our priority.


PROTON’s Policies

Quality PolicyTo achieve the above commitment, PROTON will:-

• Ensure quality as the Number One work ethics in all operations;

• Establish an effective and efficient Quality System based on the requirements of ISO

9001:2008 standards;

• Provide adequate skills and knowledge to all levels of personnel through systematic and

structured training programmes;

• Provide a culture and environment of continuous learning, improvement and innovation

towards total quality excellence;

• Provide a conducive, safe and healthy working environment in which people like to

work and prosper.

6

02 Corporate Mantra & Core Values

04 PROTON’s Policies

10 Financial Calendar

11 Key Financial Indicators

12 Summary of Financial Highlights for Five Years

16 Corporate Profile

20 Awards and Recognition

22 Corporate Information

24 Group Operations

26 Board of Directors

38 Other Senior Officers

28 Profile of Directors

42 Chairman’s Statement

36 PROTON Group Management Committee Members

58 Managing Director’s Review

Contents

PROTON 2009 Annual Report


68 Operations Review

138 Statement on Corporate Governance

156 Additional Compliance Information

160 Statement on Internal Control

166 Risk Management

172 Calendar of Events 2008 - 2009

180 Statutory Financial Statements

283 Shareholding Statistics

286 Properties Owned by PROTON Group

292 Share Price and Volume Traded

293 Notice of Annual General Meeting

295 Statement Accompanying the Notice of Annual General Meeting

Form of Proxy

Passion to Innovate


Passion to InnovateBy pushing the envelope

of innovation, PROTON

strives to build vehicles

that go beyond the

expected.

10

Announcement of Unaudited First

(1st) Quarter results for the period

ended 30 June 2008

Fifth (5th)

Annual General Meeting

Announcement of Unaudited

Second (2nd) Quarter results for

the period ended 30 September

2008 and declaration of an interim

dividend of 5 sen per share (less

25% tax) for the financial year

ended 31 March 2009

Date of Entitlement to the interim

dividend of 5 sen per share (less

25% tax) for the financial year

ended 31 March 2009

Date of Payment of the interim

dividend of 5 sen (less 25%

income tax) for the financial

year ended 31 March 2009


Third (3rd) Quarter results for the

period ended 31 December 2008


Fourth (4th) Quarter results for the

period ended 31 March 2009

Announcement of Audited

accounts for the financial year

ended 31 March 2009

Notice of Sixth (6th)

Annual General Meeting30 Jul 2009

28 Aug 2008

27 Aug 2008

27 Feb 2009

29 May 2009

30 Jul 2009

15 Dec 2008

14 Jan 2009

27 Nov 2008

Financial Calendar

21 August 2009Sixth (6th) Annual General Meeting


2005

10.7 10.7

9.9

2006 2007 2008 2009

80.6

8.5

(107.3)

33.6

(54.9)

Basic Earnings Per Share (Sen) Net Assets Per Share (RM)

Dividend Paid (RM Million) Retained EarningsCarried Forward (RM Million)

9.5

9.3

2005

4,916.9 4,908.7

4,476.2

2006 2007 2008 2009

4,291.7

4,153.9

2005

137.3

54.9

2006 2007 2008 2009

2005 2006 2007 2008 2009

27.520.6

Key Financial Indicators

12

RM’ Million 2009 2008 2007 2006 2005

NON-CURRENT ASSETS

Property, plant

and equipment 2,827.1 3,150.4 3,169.5 3,302.9 3,288.9

Prepaid land lease

payments - 24.1 9.9 10.0 10.1

Goodwill 29.0 29.0 29.0 29.0 29.0

Intangible assets 431.7 275.2 169.1 18.0 14.3

Associated companies 158.4 165.4 169.8 160.4 165.6

Jointly controlled entities 195.6 192.7 223.6 245.3 251.8

Investments 10.4 10.4 10.4 10.4 6.3

Deferred tax assets 5.7 - - 105.8 38.4

TOTAL NON-CURRENT ASSETS 3,657.9 3,847.2 3,781.3 3,881.8 3,804.4

CURRENT ASSETS

Inventories 1,395.1 1,100.3 1,273.6 1,389.0 967.1

Receivables 1,080.3 1,099.0 1,192.0 1,244.0 1,403.2

Current investments 15.3 20.8 73.4 212.0 201.5

Deposits, bank and

cash balances 913.9 1,226.0 626.5 1,586.0 2,454.7

TOTAL CURRENT ASSETS 3,404.6 3,446.1 3,165.5 4,431.0 5,026.5

Non-current assets held for sale 36.4 - - - -

TOTAL ASSETS 7,098.9 7,293.3 6,946.8 8,312.8 8,830.9

Balance Sheets as at 31 March

Summary of Financial Highlights for Five Years


RM’ Million 2009 2008 2007 2006 2005

EQUITY

Share capital 549.2 549.2 549.2 549.2 549.2

Other reserves 398.5 395.8 389.7 412.7 393.8

Retained earnings 4,153.9 4,476.2 4,291.7 4,908.7 4,916.9

Equity attributable to

equity holders of the

company 5,101.6 5,421.2 5,230.6 5,870.6 5,859.9

Minority interest - - - - 0.3

TOTAL EQUITY 5,101.6 5,421.2 5,230.6 5,870.6 5,860.2

NON-CURRENT LIABILITIES

Long term liabilities 101.5 230.5 181.6 100.3 759.6

Deferred tax liabilities 12.2 2.4 0.8 0.8 1.1

TOTAL NON-CURRENT LIABILITIES 113.7 232.9 182.4 101.1 760.7

CURRENT LIABILITIES

Payables 1,571.3 1,524.0 1,367.2 1,519.4 1,979.5

Taxation 6.3 1.6 2.2 16.9 2.6

Short term borrowings 306.0 113.6 164.4 804.8 227.9

TOTAL CURRENT LIABILITIES 1,883.6 1,639.2 1,533.8 2,341.1 2,210.0

TOTAL LIABILITIES 1,997.3 1,872.1 1,716.2 2,442.2 2,970.7

TOTAL EQUITY AND LIABILITIES 7,098.9 7,293.3 6,946.8 8,312.8 8,830.9

Balance Sheets as at 31 March

14

RM’ Million 2009 2008 2007 2006 2005

Revenue 6,486.6 5,621.6 4,687.3 7,796.9 8,483.3

(Loss)/Profit

before taxation (319.2) 144.3 (618.1) 18.0 399.3

(Loss)/Profit after taxation (301.8) 184.6 (589.5) 46.7 442.4

Retained earnings attributable

to shareholders 4,174.5 4,476.2 4,319.2 4,963.6 5,054.2

Dividend (20.6) - (27.5) (54.9) (137.3)

Retained earnings carried forward 4,153.9 4,476.2 4,291.7 4,908.7 4,916.9

SHARE INFORMATION

Per Share

Basic (loss)/earnings (sen) (54.9) 33.6 (107.3) 8.5 80.6

Dividend paid (sen) 5.0 - 5.0 10.0 25.0

Net assets (RM) 9.3 9.9 9.5 10.7 10.7

Issued share capital (‘000) 549,213 549,213 549,213 549,213 549,213

Income Statements as at 31 March 2009

Summary of Financial Highlights for Five Years


16

• To spearhead the automotive industrialisation

process and manufacturing industries;

• To acquire/upgrade technology and industrial

skills within the automotive manufacturing

industry; and

• To strengthen the international competitiveness

of Malaysia’s industrial capability.

PROTON commands a substantial share of the domestic market for passenger cars and over

the years has made its presence in the following regions:

•ASEAN•China• Indian Subcontinent•Middle East - North Africa•United Kingdom/Western Europe• Australia• South Africa

PROTON was incorporated on 7 May 1983 with three primary national policy objectives:

Corporate Profile


18

The main business activities of the Group encompass vehicle engineering, research and

development, manufacturing, distribution, sales and after-sales services. The Group is also

involved in financial services and property management in supporting the main business

activities.

The Group designs and produces cars for diverse consumer preferences. The current portfolio

of PROTON models includes the reliable family-sedan Waja, the stylish Gen.2, the elegant

Perdana V6, the versatile Arena (Jumbuck), the proven Saga range, the fun-to-drive Savvy,

the desirable sporty Satria Neo, the ‘2008 Best Model of the Year’ winner, the Persona, and

Malaysia’s first home-grown MPV, the Exora. The Group also has in its portfolio, the world-

renowned Lotus sports cars, with models such as Elise, Esprit, Exige, Europa and the latest

being the Evora to suit a range of customer demands and preferences.

Corporate Profile

The much-awaited Exora in production.


Corporate Profile

The Lotus Exige.

The Group conducts research in its centres in Malaysia and the United Kingdom on

new technologies to create cars that are unique in both design and driving performance.

Through Lotus, the Group provides comprehensive and versatile consultancy services to

many of the world’s OEMs and Tier 1 suppliers.

Currently, the Group has approximately 11,500 employees who are involved in the whole

value chain of the business, from research, design, development, testing, stamping, casting,

machining and assembly to marketing, distribution, after-sales services as well as corporate

services.

Strong customer orientation and competitively priced products are the foundation

of our business and essential to our success. We aim to maintain market leadership by

continuing to develop innovative products and satisfy our customers’ needs better and

enhance profitability.

20

Awards and Recognition

PROTON received the following awards from various organisations as testimony of the Group’s efforts in leading the Malaysian automotive industry and making in-roads in branding and motorsports.

Awards 2009• Frost & Sullivan Asia Pacific Automotive Awards - Best Model of the Year (Malaysia) 2009 for Proton Saga. • Reader’s Digest Trusted Brand 2009 Gold Award for Car Category.• Asian Auto - VCA Auto Industry Awards 2009 - Best Local Assembly MPV for Exora.• Asian Auto - VCA Auto Industry Awards 2009 - Best Local Assembly Sports Car for Satria Neo CPS.

Awards 2008• Reader’sDigestTrustedBrand2008GoldAwardfor Car Category.• Asian Auto - VCA Auto Industry Awards 2008 - Best People’s Car Award for PROTON Saga.

• Asian Auto - VCA Auto Industry Awards 2008 - Best Comeback Brand Award for PROTON.• China Press’ 2008 Chinese New Year Greeting Advertisement Award, Full Colour Category.• Frost&Sullivan’s2008AseanAutomotiveAwards - 2008 Best Model of the Year Award for the Persona. • Frost & Sullivan Malaysian Manufacturing Excellence Awards 2008 - Silver Certificate of Merit for Shah Alam Plant.• Frost & Sullivan Asia Pacific Automotive Awards - Best Model Of The Year (Malaysia) 2008 for Proton Persona.• Frost & Sullivan Malaysian Manufacturing Excellence Awards 2008 - Gold Certificate of Merit for Tanjung Malim Plant.


Awards 2007• Reader’s Digest Trusted Brand 2007 Gold Award for Car Category.• TheMalayMaildeclaredthePROTONSatriaNeo, winner of the Coolest Car of 2006.

Awards 2006• Reader’s Digest Trusted Brand 2006 Gold Award for Car Category.• Nanyang Siang Pau’s 2006 Chinese New Year Greeting Advertisement Award - Full Colour Category - 5th Runner Up.

Awards 2005• Reader’s Digest Super Brand 2005 Gold Award for Car Category.• Merdeka Millennium Endurance Race 2005 - 1st place-Overall and Class ‘O’ Winner.• MalaysianRallyChampionship2005-OverallClass Winner P10 Category.

Awards 2004• Malaysia’sBestBrandAward.• NationalCreativity&InnovationAward2004.• PROTON Waja - 4.5 star out of 5 star rating for being the Most Economical and Greenest Sedan in Australia.

Awards 2003• Industry Excellence Award 2003, Quality Management Category III.• IndustryExcellenceAward2003.• BestLandscapeCompetition(FirstPlace-Factory Category).

Awards 2002• Best Landscape Competition (Second Place - Factory Category).• Appreciation Award for Contribution to the Development of Malaysian Motorsports for 2002.• KPMG/TheEdgeShareholderValueAward2002 Sectoral Winner - Industrial Market. The award measured economic profit as a percentage of invested capital.• Highest Increase in Turnover Award among companies listed on the then Kuala Lumpur Stock Exchange (now Bursa Malaysia Securities Berhad) for financial year 2002-2003.• MotorVehiclesandTransportEquipmentSector Leader Award among the top 1,000 Malaysian companies.• Highest Increase in Net Profit Award among companies listed on the then Kuala Lumpur Stock Exchange for financial year 2002-2003.

22

Dato’ Mohd Nadzmi Bin Mohd Salleh Chairman/Non-Independent Non-Executive Director

1 January 2009

Dato’ Haji Syed Zainal Abidin B Syed Mohamed Tahir Managing Director

1 January 2006

10 March 2005

12 April 2004

15 September 2006

11 February 2008

13 May 2009

Tuan Haji Abdul Jabbar Bin Abdul Majid Independent Non-Executive Director

Tuan Haji Abdul Kadir Bin Md Kassim Independent Non-Executive Director

Dato’ Michael Lim Heen Peok Independent Non-Executive Director

Datuk Zalekha Binti Hassan Non-Independent Non-Executive Director

17 December 2004 (Resigned w.e.f. 1 January 2009)

Encik Oh Kim Sun Independent Non-Executive Director

Dato’ Mohammed Azlan Bin Hashim Chairman/Non-Independent Non-Executive Director

Corporate InformationBoard of Directors Date of Appointment


PricewaterhouseCoopers(Chartered Accountants)Level 10, 1 Sentral, Jalan TraversKuala Lumpur Sentral, PO Box 1019250706 Kuala Lumpur, MalaysiaTel : 03 - 2173 1188Fax : 03 - 2173 1288

PROTON Centre of ExcellenceKM 33.8, Westbound Shah Alam Expressway47600 Subang Jaya, Selangor Darul EhsanTel : 03 - 8026 9741Fax : 03 - 8026 9744

Tenaga Koperat Sdn BhdLevel 17, The Gardens, North Tower, Midvalley City Lingkaran Syed Putra, 59200 Kuala LumpurTel : 03 - 2264 3883Fax : 03 - 2282 1886

Encik Mohd Nizamuddin Bin Mokhtar (LS 006128)

Encik Kelvin Low

Main Board of Bursa Malaysia Securities Berhad

Auditors

Registered Office

Registrar

Company Secretary

Investor Relations

Stock Exchange Listing

Board Executive Committee (“Exco”)•Dato’MohdNadzmiBinMohdSalleh–Chairman (Appointed w.e.f. 1 January 2009) •Dato’SyedZainalAbidinBSyedMohamedTahir•Dato’MichaelLimHeenPeok•MsVimalaMenon•Dato’MohammedAzlanBinHashim (Resigned w.e.f 1 January 2009)

Board Audit Committee•EncikOhKimSun–Chairman (Appointed w.e.f. 1 June 2009)•TuanHajiAbdulJabbarBinAbdulMajid (Re-designated from Chairman to Member on 1 June 2009)•TuanHajiAbdulKadirBinMdKassim•Dato’MichaelLimHeenPeok

Board Risk Management Committee•TuanHajiAbdulKadirBinMdKassim–Chairman•DatukTanKimLeong•Dato’ZainuddinBinCheDin (Appointed w.e.f. 1 October 2008)

Board Nomination & Remuneration Committee•Dato’MohdNadzmiBinMohdSalleh–Chairman (Appointed w.e.f. 1 January 2009)•EncikAhmadTajuddinBinAbdulCarrim•EncikMdAliBinMdDewal•Dato’MichaelLimHeenPeok•Dato’MohammedAzlanBinHashim (Resigned w.e.f. 1 January 2009)

Board Disciplinary Committee•Dato’MohdNadzmiBinMohdSalleh–Chairman (Appointed w.e.f. 1 January 2009)•TuanHajiAbdulKadirBinMdKassim•TuanHajiAbdulJabbarBinAbdulMajid•TuanHajiYusofBinAhmad•Dato’MohammedAzlanBinHashim (Resigned w.e.f. 1 January 2009)

Date of Appointment

24

Group Operations

PROTON Holdings Berhad

Engineering Services Lotus Advance Technologies Sdn Bhd (100%)

Proton Engineering Research Technology

Sdn Bhd (100%)

Lotus Group International Limited (100%)

Group Lotus Plc (100%)

Lotus Cars Ltd (100%)

Lotus Engineering Ltd (100%)

Lotus Engineering Co Ltd (Shanghai) (100%)

Lotus Engineering (M) Sdn Bhd (100%)

Lotus Body Engineering Ltd (100%)

Lotus Lightweight Structures Holdings Limited

(formerly known as Holden Lightweight

Structures Limited) (100%)

Lotus Lightweight Structures Limited (formerly

known as Holden Aluminium Worcester Limited)

(100%)

Lotus Motorsport Ltd (100%)

Lotus Holdings Inc (USA) (100%)

Lotus Engineering Inc (100%)

Lotus Cars USA Inc (100%)

Manufacturing Proton Tanjung Malim Sdn Bhd (100%)

Perusahaan Otomobil Nasional Sdn Bhd (100%)

Proton Automobiles China Ltd (BVI) (100%)

Goldstar Proton Automobiles Co Ltd (49%)*

PT Proton Cikarang Motors (Indonesia) (100%)

Miyazu (Malaysia) Sdn Bhd (51%)

*Note: Refer to Note 43(c) to the Financial Statements


Sales & Distribution Proton Marketing Sdn Bhd (100%)

Proton Edar Sdn Bhd (100%)

Proton Cars (UK) Ltd (100%)

Proton Cars Australia Pty Limited (100%)

Proton Motors (Thailand) Limited (100%)

Proton Singapore Pte Ltd (100%)

Proton Parts Centre Sdn Bhd (55%)

PT Proton Edar Indonesia (95%)

Property

Proton Hartanah Sdn Bhd (100%)

Proton Properties Sdn Bhd (100%)

Proton City Development Corporation

Sdn Bhd (40%)

Financial Services

Proton Commerce Sdn Bhd (50%)

Lotus Finance Ltd (49.9%)

Proton Finance Ltd (49.99%)

Investee & Associate Companies

Exedy (Malaysia) Sdn Bhd (45%)

Netstar Advanced Systems Sdn Bhd (40%)

PHN Industry Sdn Bhd (35%)

Marutech Elastomer Industries Sdn Bhd (25%)

Vina Star Motors Corporation (Vietnam) (25%)

Aluminium Alloy Industries Sdn Bhd (19%)

Technomeiji Rubber Sdn Bhd (15%)

Peps-JV Sdn Bhd (10.50%)

Ara Borgstena Sdn Bhd (6.67%)

Others Yayasan Proton

Lotus Pension Trustees Ltd

Lotus Cars Foundation

26

Datuk Zalekha Binti Hassan

Dato’ Mohd Nadzmi Bin Mohd Salleh

Encik Oh Kim Sun

Board of Directors


Dato’ Michael Lim Heen Peok

Tuan Haji Abdul Kadir Bin Md Kassim

Dato’ Haji Syed Zainal Abidin B Syed Mohamed Tahir

Tuan Haji Abdul Jabbar Bin Abdul Majid

28

Profile of Directors

Chairman/Non-Independent Non-Executive DirectorAged 55, Malaysian

Dato’ Mohd Nadzmi, who graduated with a Bachelor of Arts in Economics from Ohio University, United States of America (“USA”), also holds a Bachelor of Science in Chemistry and Mathematics from Ohio University and a Master of Arts in Economics and Statistics from Miami University, USA.

Dato’ Mohd Nadzmi began his career as a lecturer in the Faculty of Economic Resources and Agriculture in Universiti Pertanian Malaysia. Thereafter he held various executive positions in Petroleum Nasional Berhad and Heavy Industries Corporation Malaysia Berhad. He then left to join Edaran Otomobil Nasional Berhad as Manager in the Marketing Services Department in 1984, and later assumed the positions of Executive Director and Chief Executive Officer. In 1993 Dato’ Mohd Nadzmi was appointed Managing Director of Perusahaan Otomobil Nasional Berhad, a post he held until 1996.

Dato’ Mohd Nadzmi is also currently the Executive Chairman of Nadicorp Holdings Sdn Bhd, Express Rail Link Sdn Bhd, Trisilco Folec Sdn Bhd, and Chairman of J.T. International Berhad. He sits on the Boards of Ranhill Utilities Berhad, J.T. International Berhad, V.S. Industry Berhad, Konsortium Transnasional Berhad, Transocean Holdings Bhd and several private limited companies.

Dato’ Mohd Nadzmi has attended all Board Meetings held since his appointment during the Financial Year. He has no conflict of interest with the Company and does not have any family relationships with any director and/or major shareholder of the Company. He has had no conviction for any offences within the past ten (10) years.


Dato’ Mohd Nadzmi Bin Mohd Salleh was appointed Chairman of PROTON on 1 January 2009. He is also the Chairman of various subsidiaries and Board Committees within the PROTON Group of Companies.


30

Dato’HajiSyedZainalAbidinBSyedMohamedTahirwasappointed Managing Director of PROTON on 1 January 2006. He also sits on the Boards of various subsidiaries within the PROTON Group of companies.

Dato’ Haji Syed Zainal Abidin, who graduated with aBachelor of Science in Engineering from the University of Maryland, USA, began his career as a Project Engineer with Petronas Gas Sdn Bhd in 1987, prior to joining Petroliam Nasional Berhad in 1992 as the Senior Executive of CorporatePlanning&InternationalBusinessDevelopment.He then left to join HICOM Holdings Berhad in 1995, where he assumed various senior positions in the company.

Dato’HajiSyedZainalAbidinlenthisexpertisetoPERODUAwhen he was appointed Senior General Manager in 1999. Subsequently, he was appointed Executive Director of PERODUA Auto Corporation Sdn Bhd in 2002, and later promoted to Deputy Managing Director in October 2005.

Dato’ Haji Syed Zainal Abidin has attended all BoardMeetings with the exception of one (1) meeting held during the Financial Year. He has no conflict of interest with the Company and has no family relationships with any director and/or major shareholder of the Company. He has had no conviction for any offences within the past ten (10) years.

Managing DirectorAged 47, Malaysian





Independent Non-Executive Director Aged 64, Malaysian

Tuan Haji Abdul Jabbar Bin Abdul Majid was appointed as a Director of PROTON on 12 April 2004. He is a Fellow Member of the Institute of Chartered Accountants, Australia, as well as a member of the Malaysian Institute of Accountants. He is also a member of the Executive Council of the Malaysian Institute of Certified Public Accountants (“MICPA”).

Tuan Haji Abdul Jabbar began his career in 1974 as Senior Manager in the Internal Audit and Organisation Department of Bank Pertanian Malaysia. In 1977, he joined KPMG Malaysia as Manager and was admitted to the partnership two years later. In 1993, he was promoted to Deputy Senior Partner and was made Senior Partner in 1995, a position he held until his retirement in 2000.

Tuan Haji Abdul Jabbar then joined Malaysia Derivatives Exchange Berhad in 2001 and retired as Executive Chairman on 28 February 2004. He was a past president of MICPA. He was an Adjunct Professor of the Faculty of Economics and Accounting of the International Islamic University and a member of the Senate of the Open University Malaysia Board.

He is currently a member of the Board Audit Committee of the Company. Apart from PROTON, he also sits on the Boards of Tradewinds Corporation Berhad (“Tradewinds”), Opcom Holdings Berhad and Bank Muamalat Malaysia Berhad (“Bank Muamalat”). He is Chairman of the respective Board Audit Committees of Tradewinds and Bank Muamalat.

Tuan Haji Abdul Jabbar has attended 8 out of 9 Board Meetings held during the Financial Year. He has no conflict of interest with the Company and has no family relationships with any other director and/or major shareholders of the Company. He has had no conviction for any offences within the past ten (10) years.

Tuan Haji Abdul Jabbar Bin Abdul Majid

32

Tuan Haji Abdul Kadir Bin Md Kassim was appointed to the Board of PROTON Holdings Berhad on 10 March 2005. He serves as the Chairman of the Board Risk Management Committee. He is also a member of the Board Audit Committee and Board Disciplinary Committee of the Company.

Tuan Haji Abdul Kadir holds a Bachelor of Laws Degree from the University of Singapore. He served in the Malaysian Administrative and Diplomatic Service and in the Judicial and Legal Service between 1966 and 1973, holding various positions. He is currently the Managing Partner of Messrs Kadir,Andri&Partners.

Tuan Haji Abdul Kadir is a director of Petroliam Nasional Berhad (“Petronas”), UEM Group Berhad, UEM Land Holdings Berhad, Suria Capital Holdings Berhad, TIME dotCom Berhad, Sino Hua-An International Berhad, Danajamin Nasional Berhad and Cement Industries of Malaysia Berhad. He is also a Director of a few private companies.

He is Chairman of the Exchange Committee of the Labuan International Financial Exchange as well as a member of the Investment Panel of the Lembaga Tabung Haji and Corporate Debt Restructuring Committee. Tuan Haji Abdul Kadir has attended all Board Meetings held during the Financial Year. He has no conflict of interest with the Company and has no family relationships with any director and/or major shareholders of the Company. He has had no conviction for any offences within the past ten (10) years.


Tuan Haji Abdul Kadir Bin Md Kassim



Dato’ Michael Lim was appointed to the PROTON Board on 15 September 2006 and is a Member of the Board Executive Committee, Board Audit Committee and Board Nomination & Remuneration Committee. Dato’ Lim also sits on theBoards of various companies within the PROTON Group.

After graduating with an honours degree in Engineering from the University of Strathclyde, United Kingdom, Dato’ Lim began his career with the UMW Group in 1975 in various senior managerial positions. In 1986 Dato’ Lim was appointed the Managing Director / Chief Executive Officer of UMW Toyota Motor Sdn Bhd, a joint venture company between UMW and Toyota Motor Corporation of Japan. Dato’ Lim retired in 2004.

Currently, Dato’ Lim is the Chairman of Furniweb Industrial Products Bhd, an export oriented manufacturing company with plants in Malaysia and Vietnam.

Dato’ Lim has attended 8 out of 9 Board Meetings held during the Financial Year. He has no conflict of interest with the Company and has no family relationships with any other director and/or major shareholders of the Company. He has had no conviction for any offences within the past ten (10) years.


Dato’ Michael Lim Heen Peok


34

Datuk Zalekha Binti Hassan was appointed as a Directorof PROTON on 11 February 2008. She is currently the Deputy Secretary General of Operations at the Ministry of Finance.

She holds a Bachelor of Arts (Hons) from University Malaya.

Datuk Zalekha was previously with Konsortium BajaNasional Berhad, Tenaga Nasional Berhad, Putrajaya Holdings, Multimedia Development Corporation (“MDEC”) and Penang Port Sdn Bhd.

Currently,DatukZalekhaisaDirectorofTelekomMalaysiaBerhad and Perbadanan Kemajuan Negeri Selangor (“PKNS”).

DatukZalekhahasattended6outof9BoardMeetingsheldduring the Financial Year. She has no conflict of interest with the Company and has no family relationships with any other director and/or major shareholders of the Company. She has had no conviction for any offences within the past ten (10) years.

Non-Independent Non-Executive Director Aged 56, Malaysian

Datuk Zalekha Binti Hassan



Encik Oh Kim Sun was appointed to the Board of PROTON Holdings Berhad on 13 May 2009 and Chairman of the Board Audit Committee on 1 June 2009.

Encik Oh is a qualified accountant and member of the Malaysian Institute of Certified Public Accountants (“MICPA”). He began his career with Coopers & Lybrandin London and subsequently moved up the corporate ladder, assuming positions such as Finance Director of Taiko Plantations Sdn Bhd, Financial Controller of ICI Malaysia and Finance Manager (Secondment) of ICI’s Headquarters in London, overseeing Northern Europe. In 1994, he led the successful management buyout of ICI’s Malaysian operations and was appointed Group Executive Director of Chemical Company of Malaysia Berhad until 2003.

Currently Encik Oh serves on the Board of Directors of several public companies namely, UEM Land Holdings Berhad (“UEM Land”), Pharmaniaga Berhad (“Pharmaniaga”), Faber Group Berhad (“Faber”) and Nikko Electronics Berhad (“Nikko”). He is also a Director of IMPAX Laboratories Inc (“IMPAX”), a company listed on National Association of Securities Dealers Automated Quotations (“NASDAQ”).

He is the Chairman of the Audit Committees of UEM Land, Faber and Pharmaniaga as well as a member of the Audit Committees of Nikko and IMPAX. In addition, he is the Chairman of the Nomination and Option Committee of Nikko and serves on the Nomination and Remuneration Committee of UEM Land as well as the Investment Committee of Pharmaniaga.

Encik Oh has no conflict of interest with the Company and has no family relationships with any other director and/or major shareholders of the Company. He has had no conviction for any offences within the past ten (10) years.


Encik Oh Kim Sun


36

Sitting (left to right)01 Hasnah Binti Ismail Director, Group Human Resource Division

03 Michele Kythe Lim Beng Sze General Manager, Group Legal Division

02 Dato’ Haji Syed Zainal Abidin B Syed Mohamed Tahir Managing Director

PROTON Group Management Committee Members

Standing (left to right)04 Tajul Zahari Bin Abu Bakar Director, Engineering Division

06 Mohamad Shukor Bin Ibrahim Chief Executive Officer, Proton Edar Sdn Bhd

05 Claudius Meynert Director, Export Markets Division


08 Vimala Menon Director,Finance&Corporate Affairs Division

09 Mohd Nizamuddin Bin Mokhtar General Manager, Group Secretarial &ComplianceDivision

07 Dr Wolfgang Karl Epple Director, Group Quality Division

10 Razif Bin Ahmad Director, Group Procurement Division

01 02 03

04 05 06 07 08 09 10

38

01 Muhammad Aris Bin Anuar General Manager,

Manufacturing

04 Datuk Abdul Razak Bin K P Dawood Sultan General Manager,

Group After Sales

05 Peter Anthony Das General Manager,

Marketing&Branding

03 Hazrin Fazail Bin Haroon General Manager,

Product Planning

02 Zahari Bin Husin General Manager,

Product Marketing

Heads of International Subsidiaries

Other Senior Officers

10 Michael J Kimberley Chief Executive Officer, Group Lotus Plc

11 Brian Collier Managing Director, Proton Cars (UK) Ltd

12 John Startari Managing Director, Proton Cars Australia Pty Limited

04

01

05

02 03

10 11 12


08 Low Pheng General Manager,

Group Internal Audit

07 Muhammad Amyzaddin Bin Raya Senior Manager,

Group Corporate

Communications

09 Mohd Amin Bin Putih Senior Manager,

Group Risk Management

06 Dr Badrulhisham Bin Mohd Ghazali Senior Manager,

Corporate Planning

07

0908

06

13 14

13 Moses Tan Managing Director, Proton Singapore Pte Ltd

14 Ricky Too Heng Keong President Director, PT Proton Edar Indonesia

Steering Ahead


Steering AheadThe Company navigates

through challenges and

builds on strengths to

scale new heights in

PROTON’s quest to

become a world class

company.

42

Industry OverviewThe year under review witnessed a tremendous improvement in motor vehicle sales in the first six months from April 2008 to September 2008. This uptrend, which began from the second half of 2007, was a welcome relief to the industry but unfortunately the momentum could not be maintained. After recording peaks of more than 50,000 sales in April, July and September 2008, the Total Industry Volume (TIV) saw a significant drop of 21% in the second half of our fiscal year. From October 2008 until March 2009, monthly TIV struggled to breach the 40,000 mark due to the global economic meltdown marked by the collapse of major financial institutions in the United States. This was further compounded by the increase in petrol prices which reached its apex in October 2008 followed by the customary slow months of November and December.

Despite the lagging industry sales in the second half of the year under review, the Malaysian Automobile Association’s (MAA) cautiously optimistic forecast of 510,000 for 2008 was decisively and pleasantly surpassed by a 7% margin when the TIV breached the 500,000 mark only for the second time when it recorded its second highest number in history of 548,115.

In terms of segmentation, the performance of passenger car sales was simply

record-breaking. MAA’s careful projection of 463,000 units was convincingly exceeded when

the passenger car TIV registered sales of 497,459; the highest number achieved ever, an

improvement of more than 12% compared to 2007, driven mainly by the positive consumer

sentiments during the first nine months of 2008.

Primary factors that contributed to the resurgence of the industry included the introduction

of new models at highly competitive and consumer-friendly prices; attractive and creative

financing schemes for car buyers as a result of aggressive sales campaigns; and a strong

economic growth of 5.75% in 2008.

As the new Chairman of the Company and on behalf of the Board of Directors, I am pleased to present the Annual Report and Audited Financial Statements of the PROTON Group for the Financial Year ended March 31, 2009.

Chairman’s Statement


Dato’ Mohd Nadzmi Bin Mohd SallehChairman/Non-Independent Non-Executive Director

44


Moving forward, MAA has forecasted a decrease in TIV to 480,000 for 2009 or a 12.4%

decline, with passenger car TIV also estimated to shrink to 436,800 or a drop of 12.2% over

2008. Although cautious, the forecast is well founded on the current global financial and

economic climate, reiterated by the contraction of GDP growth. Other factors that might

negatively impact car sales are the drastically fluctuating oil and commodity prices as well

as unfavourable FOREX rates.

Be that as it may, we are grateful for the Government’s recent announcement in March 2009

recognising the automotive sector as being among the major industries with potential for

further development, in light of its contribution to the growth of the nation. As part of the

Second Stimulus Package, the Government was cognisant of the less than encouraging sales

performance in the automotive industry, particularly in the second half of the year under

review, with many companies in the automotive eco-system facing difficulties. In view of

this, the Government generously allocated an additional RM200 million to the Automotive

Development Fund to continue supporting the development of the automotive industry,

in particular the vendor community, as well as to establish the Automotive Institute of

Malaysia.

To further underline its commitment to the sustainability of the industry, the Government,

in a joint effort with the private sector, agreed to assist with the auto-scrapping scheme

for PROTON and PERODUA. Under the scheme, a discount of RM5,000 will be given to

car owners who trade in their cars of any make which are at least 10 years old for the

purchase of new cars. The Government will finance part of the discount borne by PROTON

or PERODUA. This scheme is intended to stimulate car sales as well as increase the safety and

roadworthiness of the vehicles currently on the road, whilst reducing carbon emissions.

Additionally, PROTON remained true to its philosophy of producing the right car at the right

time, price and market, in our aspiration to become a regionally competitive automotive

PROTON at Hari Peneroka, Felda Maokil.



company by creating value and earning customers’ trust through the quality and innovation

of our products and people.

We are aware that there is an increasing demand for compact vehicles which are

competitively priced, economical, efficient and safe and on this premise, PROTON will

continue to be creative and innovative in our sales and marketing strategies while offering

products that cater to the needs of today’s consumers.

Financial PerformanceThe markedly improved market condition during the first half of the year under review saw

an improvement in terms of sales and revenue for PROTON. With sales increase of 9%, our

revenue was positively impacted with an increase of 15% compared to 2008.

Nevertheless, we are mindful of the challenges to be faced in the next financial year and

beyond. The gloomier second half of the year under review was a reflection and clear

indication of the foreseeable future, which will be tough in light of the financial crisis

which is greatly impacting the global automotive industry.

In light of this, our immediate and prime concern is to reinforce PROTON’s foundation and

strengthen its balance sheet in order to confidently strive forward and overcome obstacles

in order to focus on and aggressively enhance our export programme.

Accordingly, for the financial year ended 31 March 2009, PROTON recorded a loss after tax

of RM301.8 million albeit on the back of improved revenue of RM6.5 billion. This decline was

largely due to the one-off exceptional provision for the impairment of property, plant and

equipment and inventory write-down for certain models impacted by declining demand.

Additionally, PROTON’s financial performance for the second half of the financial year was

also adversely affected by the accelerated amortisation of dies and jigs for certain models

as well as higher commodity prices, increased costs of components and raw materials which

arose from higher foreign currency exchange rates, particularly, the Japanese Yen and the

US Dollar, coupled with allowance for doubtful debts.

On a more positive note, the Group’s cash and cash equivalents as at 31 March 2009 was

maintained close to the RM1 billion mark. This was after taking into account the various

research and development (R&D) expenditure undertaken during the financial year to

develop its recently launched first home grown multi-purpose vehicle, the Exora; initiatives

46

to take our successful Saga and Persona models into international markets; launch of product

refreshers, namely the Persona SE and Satria Neo CPS; and commitment for powertrain

development, further product refreshers, as well as new product introduction.

In addition, PROTON has received an R&D grant from the Government amounting to

RM81 million, under the National Automotive Policy (NAP), in recognition of the Group’s

investmentinR&DamountingtoRM162million.


DividendsAn interim dividend of 5 sen (less income tax) was declared on 27 November 2008 when

PROTON announced the financial results for the second quarter ended 30 September 2008.

The said dividend was paid to shareholders on 14 January 2009.

In view of the need to ensure that PROTON is viably strengthened and able to achieve long-

term and sustainable growth, the Board of Directors is not recommending the declaration

of any further dividends for the financial year ended 31 March 2009. With improved

profitability in the future, the Board expects to once again be able to recommend a suitable

dividend payment.



Expanding Product RangeWithin the PROTON Group, Lotus Group International Limited (“Lotus”) unveiled the

much-awaited Evora at the London Motor Show. Working on the concept of “The Practical

Lotus Sportscar”, the Evora is the world’s only 2+2 mid-engined vehicle, powered by a 3.5

litre V6 engine. With almost 300 deposits received prior to the price announcement and

having received rave reviews from international motoring media, the Evora is well-placed

to establish itself as the standard or benchmark in its car segment. To date, the Evora is

in full production and expected to contribute positively to Lotus’ bottom-line in the near

future.

Corporate DevelopmentsPROTON has during the course of the year under review, carried out various strategic and

tactical initiatives aimed at reinforcing the foundation for future growth.

The Evora.

A noteworthy mention is the involvement of a team of Malaysian engineers in key areas

of the Evora project. Their participation not only brought an added dimension to the

development of the Exora but further propagated knowledge sharing, thereby creating

invaluable synergies within the Group. Invariably, the close working relationship between

our Malaysian engineers and their Lotus counterparts will be a significant factor in creating

ever-more competitive and appealing PROTON vehicles, moving forward.

On this score, the Exora is already blazing new trails for PROTON since its official launch in

April 2009. Being Malaysia’s very first MPV and PROTON’s latest addition to its stable, the

Exora is proudly carrying our flag with its well thought out design, good built quality and

robust safety features. To date, the Exora has surpassed even the most demanding market

48


The Exora launch was officiated by the Prime Minister YAB Dato’ Sri Mohd Najib Bin Tun Abdul Razak in the presence of PROTON

Adviser YABhg Tun Dr Mahathir Mohamad.

expectations. In terms of quality, the Exora is PROTON’s first model to breach the 80% CFC

(Concern Free Car) level, continuing the uptrend which started with the Persona (at 31.8%

CFC level) and was conclusively surpassed by the Saga, which recorded a staggering CFC

level of 77.8%.

I believe the success of the Exora will contribute positively to the Group’s bottom-line in

the near future, and to sustain long-term growth, we will continue to take the next leap

forward in terms of creativity, innovation and quality when it comes to introducing new

products, both in the local and international markets.



Developing New ProductsTo surmount a challenging industry and to appeal to an ever-discerning marketplace,

PROTON must continue to produce exciting, market-centric, value-for-money products to

win over the hearts of the consumers. In this respect, PROTON has embarked on various

programmes to enhance its product line-up, with refreshers for the Saga, Persona, Waja

and Gen.2 planned for the next financial year. Further ahead, plans are in place for the

Waja and Perdana replacement models targeted to revitalise the hugely successful but

aging models.

To underline PROTON’s global competitiveness and to reaffirm our global reach, we have

also embarked on a global small car programme which is crucial in our efforts to establish

PROTON in the overseas market. Conceptually, this vehicle will be a competitively priced,

small and trendy hatch, with a small capacity engine that meets all emission standards.

At the same time, PROTON is also mindful that it has to enhance its powertrain to suit the

needs of today’s regulatory requirements and the demands of a growing environmentally-

friendly and cost-conscious customer base. To this end, PROTON, together with Lotus,

kicked off the aptly named Phoenix Project to ensure that our powertrain offerings will

satisfy these needs and perfectly complement our cars.

Expanding ExportsPROTON continued to forge ahead in our quest to expand our reach and product offerings

in key export markets during the year under review. To do otherwise would be detrimental

to the Group given that our long-term success hinges on the brand’s ability to sell more cars

well beyond the boundaries of our local market.

We are well aware that the operating landscape for the passenger car industry globally

will invariably be impacted by the global economic crisis. Fortunately, our export strategy

over the past few years has been to focus on high-growth markets regionally and selected

emerging markets, namely ASEAN, China, India, and the Middle East–North Africa; many

of which are markets that have been relatively resilient from the fallout of the economic

crisis.

50

Strategic Initiatives Moving ForwardCollaborationsIn furtherance of the Asian Multi-Local OEM (AMLO) strategy, PROTON collaborated

with Saipa Co. of Iran to explore the possibility of joining forces in the areas of engine

manufacturing, model development and R&D. The agreement will pave the way for

PROTON to further develop its technology export initiatives, specifically for the Iran-Middle

East markets.

Still on Iran, which is one of the largest car markets in that region, PROTON has also signed

anagreementwithZagrossKhodro (Zagross) for the supplyofautomotiveparts to the

latter, our sole distributor in Iran. This is the third in a series of agreements, following the

licensing,technicalassistanceandequipmentpurchaseagreements,whichallowsZagross

to assemble the Gen.2 through a completely-knocked-down (CKD) arrangement. The first

productionofthemodelcommencedinApril2009atZagross’assemblyplantinBorujerd

city, southwest of Iran.


In line with this export strategy, our locally-acclaimed Persona was successfully launched

in Brunei, Australia, Indonesia, Saudi Arabia, Egypt and Syria during the fiscal year. The

response in these markets has been and continues to be encouraging, to say the least. This

positive support can be attributed to the growing recognition of the PROTON brand in

these countries, the stylish and high-value attributes of the Persona, as well as excellent

distribution and customer support.

Minister of International Trade and

Industry, YB Dato’ Mustapa Bin

Mohamed visits PROTON.



In China, PROTON has shipped more than 4,000 completely built-up Gen.2 units to

Youngman. After the initial trial run in December 2008, the CKD supply and operations has

commenced, opening a new chapter for PROTON in China.

With Mitsubishi Motors Corporation (MMC) of Japan, PROTON entered into a product

collaboration arrangement for the development of a new vehicle, which is targeted to hit

the streets sometime in the near future. We certainly hope that this rekindled relationship

with MMC will be mutually beneficial and at the same time accelerate PROTON’s product

and quality programmes.

Innovation in MotionPROTON is aware that change, driven by technological advancement, environmental

awareness, increasing fuel prices, fuel shortages and ultimately consumer needs and

demands,iscoming.Zeroemissionvehicles,asopposedtovehiclesbasedontheinternal

combustion engine, conventional or otherwise, may soon be the order of the day. As more

and more companies are scrapping their hydrogen programme, a pure electric vehicle or

PEV seems to be the only viable alternative to achieve zero emission.

Environmentally, it releases almost no air pollutants and there is less noise pollution than

a vehicle powered by an internal combustion engine and potentially, with the proper

infrastructure, it can be very inexpensive to run and maintain.

PROTON Edar Sdn Bhd and Edaran Otomobil Nasional Berhad inked a new

Master Dealer Agreement in May 2009.

52

ProspectsAs we enter 2009, the global automotive industry is facing one of its stiffest challenges

ever in history. The denominators for most of the OEMs in the world today are declining

sales, tighter credit, increased global competition, higher cost of raw materials, and until

recently, rising petrol prices, and growing consumer demand for more fuel-efficient vehicles

are driving a transformation of the industry across its entire value chain.


For small global players like PROTON, this is a window of opportunity for us to close the gap

on the global giants, as no one has the clear advantage. OEMs with heavy investment in

conventional internal combustion engines see the electric technology as a threat, whereas

small players can seize this opportunity to catapult into the global arena. In view of this,

PROTON has taken the first step by entering into a strategic relationship with Hong Kong-

based Detroit Electric Holdings Ltd for the licensing and provision of our products and

manufacturing services with the objective of mass producing PEVs for the United States

and European Union markets.

PROTON entered into a strategic partnership with Detroit Electric to manufacture

pure electric vehicles.



The Detroit 3 (General Motors, Ford and Crysler) is in trouble and due to its intimate

symbiotic relationship with the global automotive industry, there is no question that the

automotive industry, is in turmoil. Their struggles will impact the OEMs around the world

and as the financial crisis worsens, impacting OEMs, dealers and consumers, we will see

a decline in consumer demand. Unlike previous years, when slow growth in the United

States, Western Europe and Japan was offset by increased growth in the emerging markets

of Russia, China, Eastern Europe and India, the global financial instability may result in

declining sales in these emerging markets as well. And with declining sales, the entire eco-

system will be impaired.

Thus, cash conservation and generation is imperative for PROTON and all players in the

industry. We have to be vigilant and put cost-cutting measures in place. Additionally,

initiatives that increase efficiency and disposal or shuttering of non-core assets and

operations must be promoted and executed.

Fuel efficiency will be the new buzz; small will be big and big will be small. As mentioned

earlier, alternative fuel and green technology cannot be sidelined. Although a PEV will

take some time in getting to the market and achieving commercial viability, in-roads

have already been made. As more and more OEMs, traditional or otherwise, embrace the

PEV, the desired scale could be achieved to meet the desired end commercially, and more

importantly, environmentally. The secret to success is in the battery technology. The more it

can store, the faster it charges, the more exciting the business model will become.

Impaired by the credit crunch, we will see more creative and innovative collaborations

between OEMs such as joint developments of platforms and powertrains or component

sharing or capacity utilisation. Smart partnerships based on an asset light approach as

propounded by our AMLO strategy are appropriate in the current economic situation.

In short, there will be tough times ahead for the industry and for PROTON. However, with

green shoots of an economic recovery emerging and the Government’s stimulus package

coming on stream, coupled with a revival in consumer confidence in the PROTON brand

driven by aggressive quality initiatives, as well as by placing ourselves on a firmer financial

footing with the one-off exceptional provision made for the year under review, we are

confident that PROTON will be able to weather this economic storm. We aim to do this

by maintaining our focus on establishing ourselves as a truly global OEM in terms of sales,

profitability, products, services, quality and capabilities.

54


AcknowledgementWe are at the cusp of a potentially dramatic change in the global automotive industry.

With the Detroit companies facing a bleak future and other global automotive giants

facing an unprecedented state of affairs, PROTON’s future, albeit testing, remains firmly

in our hands. Responding to the difficult 2006/07 financial year with five consecutive

profitable quarters and then to be faced with the current global economic meltdown,

is discouraging and exigent. But at the core of PROTON we have people – our greatest

assets – without whom our past would be unremarkable and our future unsustainable.

For that reason alone, on behalf of the Board of Directors, I wish to convey our sincerest

of appreciation to members of the PROTON family at all levels and across various functions

and countries and to our extended PROTON family – our sales/service dealers and vendors;

as well as our business partners domestically and internationally, for your perseverance

and dedication throughout the challenges of the last few years. I am certain that we will

continue as one to ensure our sustainability, relevancy and rightful place in history.

On behalf of PROTON and its Board of Directors, I would also like to extend our thanks

and appreciation to my predecessor, YBhg Dato’ Mohammed Azlan Bin Hashim, for his

invaluable leadership and guidance during his years of service to the Group.

The Exora is a testament of PROTON’s continued commitment to excellence. With the

expansion of our product portfolio beyond our traditional passenger car segment, the

Exora, together with the Persona and Saga, are expected to be significant contributors to

PROTON’s growth.

The Prize Presentation for the MPV Naming Contest.



At the same time, my sincerest appreciation goes out to our Board of Directors for its

vision and commitment to guide PROTON in achieving our strategic objectives. We are also

grateful for the support shown by our shareholders and confident that we will continue to

strive ahead to enhance shareholder value in the long term.

Our appreciation and gratitude also goes out to all our customers around the globe,

as without your support, feedback, comments and criticisms, PROTON would not have

been able to achieve what it has in the relatively short period of time, in becoming a

full-fledged OEM. Rest assured we will strive to become a badge that owners are proud to

own.

Finally, we would like to extend our sincerest gratitude to our Prime Minister YAB Dato’

Sri Mohd Najib Bin Tun Abdul Razak; our adviser YABhg Tun Dr Mahathir Mohamad;

our former Prime Minister YABhg Tun Abdullah Haji Ahmad Badawi; and the Malaysian

Government for their continued support and guidance of PROTON and the Malaysian

automotive industry during these tumultuous times. Without this support, our progress

and the growth of the industry would have been greatly stifled and impaired.

Thank you.


Chairman

Flagging off the convoy in conjunction with Malaysia’s participation in the

Singapore Open Super Series this year, with Badminton Association of Malaysia.

Powering Growth


Powering GrowthOpportunities abound

for PROTON to bring

innovation to life through

the harmonious blend of

technology, engineering,

and manufacturing in

products of quality.

58

Furthermore, we have made tangible progress in the area of quality, which is vital to the

brand’s long-term growth and consumer acceptance. This was supported by a focused

approach to drive greater cost efficiencies throughout our value chain while strengthening

our vendor base and distribution network in an effort to enhance PROTON’s overall business

eco-system.

Collectively, these measured steps are integral to pushing PROTON to greater heights of

success. Given that the industry’s current operating conditions may seem daunting and

challenging both internally as well as externally, we must not lose sight of what has been

achieved and keep our eyes firmly on the longer-term objectives.

Whilst we have made progress, the journey still continues, and stakeholders can rest assured

that the milestones achieved during the past years provide a positive indication that the

future indeed looks encouraging for the Company and the brand.

Product As a full-fledged automaker, PROTON is defined by its products. Hence, throughout

the Group’s operational spectrum, we ensure that our products are conceptualised,

manufactured and delivered in a way that will positively impact our customers experientially.

In this respect, we have always believed that the value of the PROTON brand is in the sum

of lasting impressions that we make on our customers.

In reviewing the previous financial year, I am confident that PROTON remains well on-track to achieve its aim of becoming a world-class car manufacturer. This confidence stems from the fact that the Group has again proven its ability to design and manufacture products from start to finish that are well received by the market.

Managing Director’s Review


Dato’ Haji Syed Zainal Abidin B Syed Mohamed Tahir Managing Director

60

Thus, it is on this very basis that our nation’s first multi-purpose vehicle (MPV), the PROTON

Exora, was developed. Catering to the needs of the contemporary Malaysian family, the

PROTON Exora is an appealing blend of style, practical functionality, value-for-money and

superior safety.

The highly encouraging response we have since received for the Exora todate underscores

PROTON’s ability to develop winning products that will contribute positively to our bottom-

line.

On the same note, our existing stable of vehicles, namely the Persona and Saga, were

recognised for their winning qualities and values during the past year.

We have what it takes to develop products that appeal to customers but in order to sustain

top-line growth, we must make sure that our existing product range continues to do well

in the highly competitive environment of today.


The name for PROTON’s first MPV was unveiled in February 2009 following a Naming Contest.



With this in view, we have updated and refreshed key models during the year under review.

These include a Special Edition version of the Persona, which was introduced to enthusiastic

response, and a “sportier” Satria Neo that captured the imaginations of trendy Malaysians.

In addition, we developed several variants for our new Saga model to cater to niche but

sizeable markets.

Our acquisition of Lotus remains a valuable investment for us as we continue to further

explore and utilise their engineering advancements and technologies to enhance our

products and manpower skills. We have made positive progress in our technology transfer

projects with Lotus, such as in vehicle driving dynamics, development of the electric vehicle,

as well as powertrain and CamPro engine development.

As we move forward, PROTON will maintain its momentum to introduce new products

while updating our existing range. We will continue to invest in research and development

as well as extensive market surveys to ensure that we keep on delivering products that

are relevant. Product development projects include the incorporation of improved new

technologies into our vehicles as well as exploration of new and alternative technology

such as hybrid and electric vehicles.

In summary, we aim to achieve a stable of well-proven and well-received products that will

enable the brand to seize market share at home as well as abroad.

62


Quality Continuous quality improvement remains the mainstay for PROTON. While tangible results

have been achieved over the years, as reflected in the significant reduction in customer

concerns ratio for our vehicles, complacency in this area is not an option for the Group.

During the year under review, various quality improvement activities were carried out

throughout the organisation. We reintroduced a Group-wide Quality Campaign to drive

home the importance of quality in the hearts and minds of PROTON’s management,

employees as well as business partners. Quality improvement is a comprehensive process

that has to transcend all aspects of our business in order to garner results.

Additionally, we have taken significant measures to improve on customer engagement

programmes, by increasing customer-focused activities and reaching out in order to acquire

their views, suggestions and complaints as part of our improvement process.

The financial year under review also saw the Group making headway with our customers

by enhancing the quality of our customer-relations management (CRM). Our end-users can

be our brand champions if they come away with a positive experience after every single

interaction with the brand, including cases where we have to address concerns or issues.

Also, in line with our aim to be more responsive to our customers, we have remained

committed to our PROTON i-CARE customer service programme with the launch of the

10th Servis Mesra outlet in Damansara Jaya, Selangor, in the second half of 2008. This

programme is a key platform to enable us to deliver high quality after-sales services, which

is paramount to building long-term brand equity.

The focus on quality improvement was

further enhanced during the Financial

Year.



Cost Efficiency Cost management has become all the more important in this challenging operating

environment where lower demand has been exacerbated by the increased cost of raw

materials and components.

In view of this, PROTON continued to strengthen collaborations within our product

planning and development, manufacturing assembly, procurement and cost control

departments to minimise wastage while maximising cost efficiencies. At the core of our

cost efficiency measures is the reduction of the Bill of Materials (BOM) cost such as in

carrying out global sourcing for major material suppliers beyond Malaysia. We have been

identifying opportunities to tap into the supply chain of these major suppliers to reap the

benefits of lower material costs.

Apart from that we have also carried out development programmes for our existing

vendors to improve and expand their manufacturing competency to include research and

development capabilities. By reducing their costs of product development outsourcing, the

vendors will be able to offer competitive prices of parts and materials not only to PROTON

but to other major automotive players within and outside the country.

64


Domestic Market Operational cost efficiencies can also be derived from a strengthened distribution network.

A new Master Dealership Agreement signed between our distribution arm PROTON Edar

Sdn Bhd and Edaran Otomobil Nasional Berhad (EON) to rationalise the sales and services

network of PROTON vehicles certainly emphasises this fact.

The rationalisation aims to effectively reduce the number of sales outlets from 282 to 191

and service outlets from 361 to 214 by end of 2009. The exercise will not only result in cost-

savings but improvements in the efficiency and productivity of our dealer network eco-

system. PROTON will have a unified and strengthened marketing, distribution and after-sales

network, thus allowing us to compete more effectively and efficiently in the competitive

marketplace of today. Ultimately we seek to improve on our customer satisfaction index

(CSI) and service satisfaction index (SSI) not only in terms of ensuring better quality services

but also greater efficiency in logistics arrangements.

Export Apart from the local market, we have begun a more aggressive approach to capture export

markets as defined under the Asian Multi-Local OEM (AMLO) strategy, namely, ASEAN,

China, India and the Middle East-North Africa (MENA). We continue to concentrate on

these high-growth regional markets for economies of scale and plan to make further in-

roads into these markets by leveraging on pre-existing trade and cultural linkages with

Malaysia.

For material and parts sourcing, we have started to develop benchmarking and best

practices guidelines in order to stay comparatively at par in terms of our procurements

with other players within the industry.

In addition, PROTON is committed to utilising a systematic decision-making process

termed Value Analysis/Value Engineering or VAVE to secure raw materials and

components at the greatest value, as opposed to cost, which will ultimately provide

a long-term cost advantage to the Group.



Launch of Persona and Gen.2 IAFM in Egypt in November 2008.

During the year, we launched the Persona in Egypt, Saudi Arabia, Oman and Syria, as well

as Indonesia. We also launched the Persona CNG and the Satria Neo CPS in Thailand, while

we introduced the Saga in Brunei.

In December 2008, we concluded a series of agreements with Zagross Khodro (ZK) of Iran

which will allow ZK to assemble the PROTON Gen.2 model through a completely-knocked-

down (CKD) arrangement in Iran. The agreement signifies our continued commitment to

the vast Iranian market as well as the overall export market.

PROTON will further strengthen export programmes particularly in ASEAN, China and the

Middle East. We plan to introduce the Saga and Exora in all overseas markets in the very

near future.

Vendor Base Concurrently with the rationalisation of our distribution network, PROTON also made

efforts to consolidate the vendor base with the aim of bolstering cost efficiencies and

quality improvements.

66

As at the end of March 2009, our direct or first-tier vendors stood at a total of 221 compared

to 260 in our 2006 financial year. The consolidation of our vendor network enables the

Group to build stronger, more meaningful relationships with capable and competent

vendors. In turn, we can leverage on greater economies of scale, while enhancing overall

delivery quality.

The vendor community will continue to play a very significant role in our journey forward.

PROTON is committed to working even more closely with the vendors in order to improve

their capability, efficiency and efforts in reducing the cost of components in the next

financial year.

PROTON also remains true to its Early Vehicle Involvement programme where vendors are

encouraged to participate in the vehicle conception stage. The input we have received

during this stage for the Persona, Saga and Exora have proved to be invaluable especially

in the areas of component supplies and managing cost efficiencies.

Moving Forward For us, the road ahead will continue to be challenging. The passenger car sector locally and

around the world, including the markets PROTON has gained a foothold in, will continue

to see softened demands as the pace for economic recovery remains uncertain.

PROTON will have to be more assertive in communicating its products’ unique selling

propositions to its markets both locally as well as internationally. Offering the “right car”

at the “right time” and at the “right price” will have a universal appeal throughout all

markets.

We will also continue to look in detail at our entire business value chain as we search for

innovative solutions to derive greater cost efficiencies. We will keep working with and

encouraging our vendors and distributors to play an integral role in this area.

At the same time, PROTON will continue to invest in human capital development by providing adequate training programmes to our workforce. The people in the Company must be fully exposed to best business practices in order to support our drive to build our presence in the export markets.



Nevertheless, we believe that there are significant opportunities even during challenging times. The PROTON Group will work collectively as one to seize these opportunities and accelerate the brand to become one that is respected for its product and service quality. We have the foundation and nothing is impossible if we put our minds together towards enhancing the growth of the Company. On this note, I am pleased to present to you our Operations Review that highlights key developments and initiatives undertaken in the Group’s core areas during the year under review.

I hope that you will find the Review informative and that it provides you with a clearer picture of our achievements and prospects todate.

Thank you for your continued support of PROTON.


Managing Director

The media preview of Satria Neo CPS.


68

Operations Review

It is the foundation that drives product development and innovation which are integral to

enabling an automaker to not only survive but to thrive in this ever-challenging operating

environment.

Based on this premise, PROTON has remained committed towards advancing its engineering

capabilities during the year under review. This was achieved via a steadfastness to

pushing the envelope in developing new models and refreshing existing products, while

continuously making progressive headway in research and development (R&D) as well as

technical aptitude.

Engineering ServicesThe cornerstone of any successful automotive company ultimately rests in the company’s engineering prowess.

Knowing Our MarketsWhile PROTON continued efforts to shorten its learning curve on the engineering front,

we were also mindful of keeping our customers’ needs in mind as we invested our energies

in strengthening the Company’s engineering capacity. But no matter how good our

engineering abilities, PROTON cannot develop a successful product without understanding

our end-users.

As such, throughout the past year, the Group deployed several teams of R&D engineers

and technicians to key export markets, namely the Middle East, South Asia, South East Asia

and China. The mission was to garner as much end-user details as possible including driving

habits, road and weather conditions, as well as the needs and preferences of the individual

markets.


70

ExoraThe Exora is a testament to the coming-of-age of the Group’s R&D and engineering

capabilities. The model is the first in the Company’s 26-year history to be built without the

feasibility prototypes and in a record time span of 18 months, which was a feat in itself.

The Exora is PROTON’s answer to the booming Malaysian MPV market and it was built

around our very own well-received CamPro CPS 1.6 liter engine. It features a hydro-formed

sub-frame and lightweight front-end module as well as tailored blanked body parts which

are able to reduce the overall vehicle weight while significantly improving its safety

performance. Having surpassed all European crash regulations, the Exora is at par with the

other MPVs in the market.

Product Development The Group’s financial year under review was punctuated by a historic milestone when we

introduced the Exora, the first PROTON multi-purpose vehicle (MPV). In addition, the past

year also saw a series of product refreshments to our existing line of vehicles that were

tailored to appeal to an even broader market segment.

At the same time, the Group’s R&D homologation team worked tirelessly to keep abreast

of regulatory and certification requirements in key markets. Collectively, the information

gathered will be integral to ensuring that we develop products that are well in line with

the markets’ needs.

Operations Review


The country’s first MPV, the Exora, made its debut in April 2009.

While the Exora is technologically sound, it was also developed with the end-user in mind.

Based on the “car for the people” concept, the Exora was designed to carry seven adults in

an exceptionally comfortable and roomy interior that has separate air-conditioning vents,

a must-have in hot climates.

All in all, the Exora was created for practical daily use. It is meant to be safe on the

road and withstand the rigours of everyday driving, while providing the space required

for contemporary families of today. The Exora has already hit a chord with Malaysians

and we expect it to continue surpassing expectations despite the challenging economic

circumstances in other markets as well.

Operations Review

72

Product Refreshments

Persona SE The Persona, which was introduced in 2007, continues

to receive encouraging support from its market

segments. This is a reflection of its robust built-

quality as well as appealing contemporary lines and

contours.

To sustain and leverage on the interest in this winner,

PROTON introduced the enhanced Persona Special

Edition (SE) in August 2008. The newly elegant SE is

powered by the CamPro IAFM Engine which offers a

smoother torque curve. At the same time, its interior

has been enhanced with leather seats, steering wheel

wrap as well as new gear knob and trims. The SE also

features several must-have gadgets such as racing-

inspired meter and dials, auto cruise control and GPS

navigation kit.

Meanwhile, the exterior of the SE boasts a stylish body

kit, smoked headlamps, silver matte door handle,

front and rear garnish, and new alloy-rim designs.

Overall, the Persona SE provides end-users with value-

for-money comfort and premium accessories.

Saga NGV Sky-rocketing petrol prices in 2008 propelled the

rise of the economically practical natural gas vehicle

(NGV). While petrol prices have since plunged

dramatically, prices are expected to strengthen in

the long run, marking positive prospects for the NGV

market.

On this score, PROTON has been investing time and

effort in NGV development programmes focused on

the Saga since 2007. This initiative came into fruition

with the launch of the Saga NGV variant, which is

powered by a 1.6L CamPro IAFM engine.

Being a specially-configured NGV, as opposed to an

add-on or “modified” version most commonly seen

on the road, the Saga NGV is able to cater to the

growing NGV demand from both commercial and

private car users locally and internationally.

Operations Review


Saga 1.6L Taxi In line with the new regulation that requires all

Malaysian taxis to be powered by engines above

1500cc, PROTON successfully developed a new product

variant, the Saga 1.6L, during the financial year. The

Saga 1.6L features the CamPro 1.6L IAFM engine,

which is well-suited for the demanding requirements

of taxis. This variant will offer the country’s taxi fleet

a viable option to replace ageing vehicles.

The trendy enhanced Satria Neo CPS.

Satria Neo CPS “Sporty, Youthful and Power” were the ideals

promised by the enhanced Satria Neo CPS, which was

unveiled in the first quarter of 2009. These ideals were

delivered in the form of a brand new performance-

oriented CamPro CPS engine, which pushes 125

horsepower or a 13.6% increase in output over the

standard engine.

In addition, the Neo CPS also features improved

drivability, whereby the engine adapts to its user’s

driving style by automatically switching on the

“Power Mode” when required. Coupled with the

stylish body kit reminiscent of the original Satria GTi,

as well as “race car” trappings of red-accent leather-

wrapped steering wheel, leather seats, door trims

and sporty gear knob, the Neo CPS has become an

instant hit amongst young and trendy Malaysians. To

cap it off, the Neo CPS proudly bears the “Handling by

Lotus” badge at its rear to show its proven pedigree

in international race events including the Merdeka

Millenium Endurance Race (MME) and the Asian

Touring Car championship.

Operations Review

74

R&D – Towards Technology Advancements Electric Vehicle (EV) The automotive industry worldwide is going “green”. This trend has become more

pronounced over recent years due to several factors including the growing public concern

on safeguarding the environment. This has led to regulations by various Governments to

curtail carbon emissions and skyrocketing fuel prices, as well as the global economic crisis

that has fueled the need for more efficient, economical vehicles.

In view of this, the Malaysian Government has also been pro-active in encouraging the

development of alternative fuel vehicles including electric powered vehicles. In answering

the Government’s call, PROTON’s R&D team, along with its counterparts in Lotus

Engineering, United Kingdom, developed two EV prototypes during the year under review.

The prototypes were based on two models: the Persona as a performance EV and the Saga

as a city-practical EV.

PROTON has made in-roads in the development of ‘green’ vehicles.

Operations Review


Collaborations with Centres of Education Given PROTON’s role as a national automaker, the Group’s long-term strategy includes

collaborating effectively and efficiently with local education institutions in the area of

advanced automotive technology.

These collaborations, which are primarily in components, manufacturing and quality

management, are integral to developing and enhancing our country’s human capital

expertise in automotive engineering and technology. At the same time, the collaborations

are providing the Group with a cost effective R&D platform via the sharing of resources

including human resources and facilities.

Towards this end, the year under review was marked by a notable agreement sealed

between PROTON and Universiti Teknologi Malaysia (UTM) to promote the exchange of

technical expertise and information as well as to support the development of up-to-date

R&D facilities, and coordinate advanced research initiatives. This partnership will play a role

in augmenting PROTON’s R&D processes with a view to bringing products to market more

rapidly.

Skilled human capital is vital in enhancing PROTON’s engineering capabilities.

Operations Review

76

Fostering Technology Development In addition to strategic collaborations with institutions of higher learning, the Group is also

spearheading efforts to entice young Malaysians to the field of automotive engineering

and R&D.

In line with this objective, PROTON successfully organised the first Technology Week in the

second half of 2008. The event, which was officiated by former Prime Minister YABhg Tun

Abdullah Bin Haji Ahmad Badawi, was a platform to showcase the Group’s engineering

capabilities and production facilities in order to inculcate a better understanding and

interest in automotive technologies.

PROTON’s Technology Week 2009 featured numerous activities including technical

presentations at our state-of-the-art Virtual Reality (VR) Centre, exhibition on computer-

aided vehicle design and engine construction as well as vehicle testing sessions at PROTON’s

test track, which proved to be a major attraction for the visitors.

At the end of Technology Week, the event had recorded some 50,000 visitors, comprising

mainly faculty members and students from our country’s leading universities and education

institutions as well as school students and the general public.

PROTON launches its three millionth car during the Technology Week.

Operations Review


Recognition in R&D PROTON’s R&D team has played a crucial role in developing products that are practical,

value-for-money and enjoyable. It indeed takes a colossal team effort to develop a product

that not only surpasses safety standards but also resonates with end-users in terms of the

overall driving experience.

In recognition of the R&D team’s efforts, the Group successfully clinched the Malaysia Good

Design Mark Award 2009 for the Satria Neo and Persona models. The award, in its 12th year

and spearheaded by the Ministry of Science, Technology and Innovation via the Malaysian

Design Council, acknowledges positive contributions made by the industry in the areas of

R&D and product development.

Our R&D capabilities have led to world-class

breakthroughs like the CamPro engine.

PROTON team is recognised for R&D achievements.

Operations Review

78

Operations Review

To achieve new levels of excellence in spite of tough economic conditions, the production

landscape at PROTON has had to evolve, especially in view of manufacturing new products

such as the iconic Saga and Malaysia’s first home-grown multi-purpose vehicle (MPV),

the Exora. The Group, as such, implemented several manufacturing processes to enhance

quality and production levels to better meet the discerning needs of customers locally and

globally.

During the period under review, owing to a high number of bookings for the Saga,

the main plant in Shah Alam had to implement two shifts for the production of 6,122

units in April. Production volume was subsequently increased to 8,000 units a month

by September 2008.

Production volume at the Tanjung Malim factory also saw an increase with the introduction

of the Persona Special Edition (SE), a restyled version of the original Persona. However, due

to the global economic meltdown in demand, sales of new cars dropped significantly in the

second half of 2008. By December 2008, the plant in Tanjung Malim returned to a one-shift

operation which was subsequently adopted by the main plant in January 2009.

ManufacturingThe Group is fully cognisant that manufacturing excellence is essential to sharpen PROTON’s competitive edge in today’s increasingly challenging environment given the more sophisticated customer base.


80

Operations Review

These measures were not only necessary to reduce cost and improve efficiency but also in

preparation for the production of the Exora in Shah Alam. As a result, the excess manpower

from Tanjung Malim was transferred to the Medium Volume Factory (MVF) in Shah Alam

and no new recruitments were necessary. However, in order to handle the production of

the Exora, which was launched in April 2009, the Waja production line at the MVF had to

be discontinued in July 2008.

Notwithstanding these challenges, PROTON achieved a production volume of 157,643 units,

representing an increase of 16% over the previous financial year. This comprised 87,053

units at the main plant, 3,932 units at the MVF and 66,658 units from the Tanjung Malim

plant. Delivery increased to 157,211 units, of which 139,824 units were for the domestic

market. This marked an increase of 23,094 units compared to the previous financial year.

PROTON’s channel stock position also increased to 17,925 units from 13,262 units. This is

likely to remain until new cosmetic changes are implemented to create fresh excitement in

the market. Production plans are also being continuously adapted to suit market conditions

and to reduce further the stock channel.

The production volume is forecasted to increase by 4,789 units to 162,000 units in the next

financial year. This is premised mainly on the strong demand for the newly launched Exora

and the plan for more PROTON models to be upgraded.

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