1. 0 ASSIGNMENT 1 1. 1 Automobile Industry History The birth of the car as we know it today took several years and the works and developments of many people. It was not until 1885 that the first car rolled down the streets, however, earlier attempts at steam powered road vehicles were successful, giving people the idea that cars as we know them today have existed for a lot longer than they have. In the year 1769, a French engineer by namely Nicolas J. Cugnot invented the first automobile to run on the roads.
This automobile, was a self-powered, three-wheeled, military tractor that made the use of a steam engine. The range of the automobile was very brief and it could only run at a distance for fifteen minutes. In addition, these automobiles were not fit for the roads as the steam engines made them very heavy and large, and required ample of starting time. Oliver Evans was the first to design a steam engine driven automobile in the U. S. Then, a Scotsman, Robert Anderson, was the first to invent an electric carriage between 1832 and 1839.
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However, Thomas Davenport of the U. S. A. and Scotsman Robert Davidson were among the first to invent more applicable automobiles, making use of non-rechargeable electric batteries in 1842. Development of roads made traveling comfortable and as a result, the short ranged, electric battery driven automobiles were no more the best option for traveling over longer distances. The Automobile Industry finally came of age with Henry Ford in 1914 for the bulk production of cars.
This lead to the development of the industry and it first begun in the assembly lines of his car factory. The several methods adopted by Ford, made the new invention popular among the rich. According the automobile industry US, dominated the automobile markets around the globe with no notable competitors. However, after the end of the Second World War in 1945, the automobile industry of other technologically advanced nations such as Japan and certain European nations gained momentum and within a very short period, beginning in the early 1980s, the U.
S Automobile Industry was flooded with foreign automobile companies, especially those of Japan and Germany. The current trends of the Global Automobile Industry reveal that in the developed countries the automobile industries are stagnating as a result of the drooping car markets, whereas the automobile industry in the developing nations, such as, India and Brazil, have been consistently registering higher growth rates every passing year for their flourishing domestic automobile markets. 1. 2 The Growth Pattern
Automobile industry is the growing at an extraordinary speed in Asian region in the world, primarily due to a saturating automobile industry of western world. China, India, & ASEAN (Association of South-East Asian Nations) countries are the major driving markets for Asian automobile industry. The report “Asian Automobile Industry Outlook (2007-2011)” says that the low cost vehicles are driving the growth of automobile industry in promising economy, such as China & India. It offers huge opportunities for global players in these economies.
Besides those Asian countries, such as Thailand, Philippines, Indonesia, and Malaysia are expected to be the potential markets for automobiles due to AFTA (ASEAN Free Trade Area), this was told by our Malaysian prime minister Dato’ Sri Mohd Najib Tun Abdul Razak in the Renaissance Hotel, Kuala Lumpur, on the 7th march 2005, where he was giving speech on Malaysian automobile industry and AFTA. Moreover from long-term perspective, cheap financing and prices discounts, rising income levels, and infrastructure developments will drive the growth in majority of the Asian automobile market.
However poor infrastructure is affecting the growth pattern in Asian automobile industry for an example commercial vehicle dominates Indonesian and two wheelers Sri Lankan automobile market due to the poor roads. Nevertheless, hereby I have chosen to talk about our Malaysian automobile industry growth pattern and its development . In the 1960s, the Malaysian government encouraged the setting up of automobile meeting plants in Malaysia. The main objectives were to reduce the imports of completely built-up units (CBU) that will help to stabilize balance of payments, to create employment and to provide the base for transfer of technology.
In the 1970s, the “Local Content Policy” was promoted to enhance the development of local parts and components industry. The historical moment for the automobile industry was in 1985 when the first national car, Proton Saga, made its first appearance. Proton’s entry into the local automobile industry has restructured the industry from an assembly phase to manufacturing phase. In 1994, the second national car, Perodua Kancil made its introduction. The implementation of the national car projects was a step towards the development of an integrated motor vehicle industry.
The projects have contributed to the growth of the local component industry, as attested by the presence of 350 component manufacturers in Malaysia, of which 234 are Proton vendors and 135 are Perodua vendors. The national car projects had also attracted new car manufacturers to set up their manufacturing bases in Malaysia to enter the ASEAN markets, paving the way to support the nation’s industrialization programme. Currently, there are four national car manufacturers, ten non-national vehicle assemblers and three composite body sports car makers in Malaysia.
Renowned cars such as Mercedes, Honda, BMW, Ford, Volvo, Toyota and Hyundai are also being assembled locally. So far the automobile industry has succeeded in fulfilling the government’s industrialization efforts to enhance the country’s economy. The electronic and automobile industries have been the main medium for the development of the manufacturing sector over the years in Malaysia. The automobile industry has been a prominent double-digit contributor to the manufacturing sector. The automobile industry’s achievement of higher value added over the years was due to a remarkable increase in the production volume of the automobile industry.
The major the sub-industries within the automobile industries are the ship and boat building and repairing, manufacture of motor vehicle bodies, manufacture of automobile industry, manufacture and assembly of motor vehicle, manufacture of motor vehicles parts and accessories, manufacture and assembly of bicycles, tricycles, trishaws and their parts and accessories and manufacture and assembly of motorcycles and scooters. The manufacture and assembly of motor vehicle industry is the major contributor to the growth of the automobile industry, whereby Proton and Perodua are the major performers.
It is noted that, the manufacture of motor parts and components industry played a key role in the development of the automobile industry. This is due to the high demand by the foreign markets. Among the 350 component manufacturers in Malaysia, 40 of them are presently exporting their components to foreign markets. 1. 3 The industry’s contribution to the Nation’s (Malaysia) economy Firstly let’s have an overview on Malaysian automobile industry, as I did not mention earlier in the growth pattern because to know its contribution we need to know how it developed on the first place.
Therefore one of the key aspirations of Malaysia in its force to become an industrialized nation was the development of its automobile industry. Beginning with a single assembly plant in 1982, Malaysia now has a crowd of automobile related industries and is proud of its two primary automobile prodigies, Proton and Perodua. The establishment of Proton in 1982 and consequently Perodua in 1993 acted as catalysts to the development of the automobile sector. Subsequently, the Malaysian automobile components and parts industry also grew in response to the increasing demand for parts by the two major car manufactures.
This promoted the development of original technologies and local capabilities in line with the development of the foundation automobile industry. As a result of this growth, Malaysia is proud to be the only non-developed country in the world to have its own full automobile design and engineering capabilities which is no small achievement. The first expedition of Malaysia in fully entering the automobile industry began with the establishment of the first national car project, Perusahaan Otomobil Nasional (Proton) in 1983.
This marked an important objective to the development of the country’s automobile industry, not only in terms of the nation’s satisfaction, but also by proving that Malaysia now had a sufficiently advanced technological base to become a driving force in the automobile industry. The rapidity quickened, and soon the second national car project, Perusahaan Otomobil Kedua (Perodua) was launched in 1993. Malaysia also focused on the development of motorcycles and their associated systems, and by 1996, the national motorcycle project, Motorsikal Dan Enjin Nasional Sdn Bhd or MODENAS was born.
Malaysia is also active in the heavy vehicle industry, with companies such as the Malaysia Bus and Truck Sdn. Bhd, Deftech Sdn. Bhd and DRB Hicom providing heavy vehicles for both commercial and military use. These developments are very important to the nation, as they have not only set the base for which these industries to grow further, but have also fostered the growth of a wide network of local automobile components and parts manufacturers. Furthermore, in 2005 there are now six motor vehicle manufacturers and nine motor vehicle assemblers here in Malaysia.
There are also 10 motorcycle and scooter manufacturers all of which have a total installed capacity of over a million units per year. The automobile industry has also helped the economy through the generation of work opportunities, and in 2005, more than 57,400 jobs were generated by the automobile sector. It is worthy to note that this figure consist of only the new job opportunities created, and does not include the existing huge workforce that is already employed in the sector and other related downstream industries. Another important sector of the Malaysia automobile industry is the vendor or spin-off technology program.
In this sense, the volume of the Malaysia automobile sector consists of such vendors, each providing different components and services for the main assembly industries. Local vendors contribute up to 60 – 90 % of content in the vehicles made, while assemblers are able to achieve 30 – 60 % of local content in their assembled models. As of 2007, there are approximately 1129 vendors, with 248 vendors providing components directly for use by the industry while the remaining vendors providing support services and components for the primary vendors.
Currently, Proton and Ministry of International Trade and Industry (MITI) have taken steps to develop the vendor industry to create more level vendors. The first step taken is to reposition many of Proton’s activities onward to vendors. This serves two functions, firstly, it reduces the load placed on Proton and secondly it allows these vendors to develop themselves further. Currently, the Malaysian automobile industry is structured such that the major assembler contributes to almost 100 p%of the process of assembling the vehicle.
This includes styling, product planning, design, testing control of sources and manufacturing. However, under the current vendor development program, efforts are being made to slowly move away activities such as manufacturing, sourcing, assembly and testing to other companies, while Proton itself is responsible mostly for engineering design and styling. In order to achieve this, Proton and MITI have come up with the vendor development program. The strengthening of vendors will be taken in stages. Firstly, vendor rationalization will be carried out, to specialize and tier the vendors.
Subsequently, the vendors will undergo consolidation, where vendors will undergo mergers, joint ventures, equity participation programs and such. A final step will also be placed for vendors to exit the development program once they become strong enough to act as an assembler or manufacturer. Currently, the vendor development program put forward by Proton and MITI is a two-fold program. MITI will approach the program through the allocation of the RM 450 million Automobile Development Fund, and will cover M&A, tooling, productivity and export enhancement programs.
The second phase will be guided by Proton, and will cover the consolidation and rationalization of the vendors through mergers, participation in equities and joint ventures. Proton will also lead the development of the tier system for vendors and assist them in their specialization and will also create the necessary exit plan for them, with the total approach on vendor development will be carried out via vendor advancement programs and collaborations. The industry is over a century old with countless companies adapting to suitable market strategies and consumer environments.
As such, there is no doubt that with determination and drive, the Malaysian automobile industry will continue to flourish, regardless of the obstacles faced. With this I will like to attach some abstracts some of the points from the PVA International YB Tan Sri Nor Mohamed Yakcop,Minister of Finance II at Putra World Trade Centre, Kuala Lumpur about the automobile’s contribution. Which says that, “The Malaysian automobile industry has definitely come a long way since the early eighties.
Since the establishment of Proton in 1984, Malaysia has developed integrated capabilities in automobile manufacturing, which includes local design, and engineering capabilities, full scale manufacturing operations and extensive local participation in the supply of parts and components. To date, automobile manufacturers and assemblers have invested RM11 billion while automobile parts and component manufacturers have invested more than RM8 billion. We are proud to note that today, Malaysia is the only developing country in the world to have its own full automobile design and engineering capability.
Our sustained economic growth has also contributed to a significant increase in the demand for motor vehicles. New Total Industrial Vehicles (TIV) registrations over the last 10 years have increased from about 200,000 to the estimated registrations of 550,000 TIV in 2005. This is equivalent to about 30. 0 per cent of the total demand of the ASEAN 5 which is Indonesia, Malaysia, Philippines, Singapore and Thailand. The national car manufacturers have thus far been the primary beneficiaries of the higher domestic demand for motor vehicles. This in turn has supported the development of domestic automobile vendors supplying Proton and Perodua.
Today, we have 340 vendors supplying parts and components worth well over RM5. 0 billion compared to only 140 vendors supplying products worth RM2. 0 billion in 1994. Over the past 20 years, the national automobile industry has been a success firstly, as a contributor of economic value such as in terms of employment; secondly, as a base for national industrialization through developing indigenous design and engineering capabilities; and thirdly, as a sector with broad based Bumiputera participation across the value chain including manufacturing and distribution.
However, we cannot rest on the success of our achievements to date. The principal issue facing the domestic automobile industry is two-fold, being on one hand, the threat of greater competition and on the other hand, the need to improve competitiveness. The threat of greater competition arises from the trend towards greater liberalization and developments in the global automobile industry. The global automobile industry is subject to increasingly intense competition.
The slow growth in developed markets, weak financial performance and excess capacity, is leading vehicle manufacturers to aggressively rationalise to achieve even higher levels of scale. It is therefore no surprise that the trend of liberalization is accelerated with global car companies from developed nations seeking to gain market access in the fast growing Asian region. The trend towards increased liberalization in the automobile sector is unavoidable. However, commitments such as ASEAN Free Trade Area (AFTA) should be viewed more as an opportunity rather than a threat.
The premise of AFTA is that each of the ASEAN countries would be able to focus on a niche and leverage on the ASEAN wide regional market to achieve the necessary scale in order to be competitive. We cannot expect to be completely insulated from global developments. Increased competition is already reflected in the decline in market share of national manufacturers in recent years. There is an urgent need to address the competitiveness of domestic manufacturers and vendors, both in terms of costs and quality.
If this is not addressed, there is a very real danger of a downward spiral, whereby poor competitiveness leads to lower volume, which in turn weakens competitiveness and ultimately leads to the decline of the domestic automobile industry. ” 1. 4 The Foreign Direct Investment (FDI) incentives in related to the industry and its relation to the government policies Incentives to attract foreign direct investment (FDI) into Malaysia are expected to be among the highlights of the upcoming Budget 2010.
It has always been our role to provide whatever necessary incentives to encourage the entry of FDI into the country. We are after all competing with other countries particularly in the region, for investments. But, be sure that goverment will ensure continuity in being competitive as an investment destination the government is committed to encouraging more FDI providing tax exemptions and the latest is the liberalization of 27 sub-sectors of the services industry. As to what specific new incentives the new budget has, it depends on our Prime Minister, Datuk Seri Najib Tun Razak.
The new National Automobile Policy (NAP) is expected to announce details of the review soon. The government is seeking a balance between imports and locally produced cars and Proton is the main concern. Anyhow it is, the government will take into consideration, the interest of all parties. As the country’s economy is directly linked to trading globally there was a need to uplift the local automobile industry, so that it provides a balance. When there is a downturn, the government can will be impacted directly.
Therefore, by uplifting the automobile industry, government can balance off the trading activities. 1. 4 1 The National Automobile Policy (NAP) of Malaysia Since the establishment of Proton in 1985, the Malaysian automobile sector has come a long way and has succeeded in developing included capabilities in the automobile industry. This includes a fully self-sustainable local design and styling capabilities, full scale manufacturing operations and wide-ranging local contribution in the supply of components.
The Malaysian market today is ASEAN’s largest passenger vehicle market, selling more than 500,000 vehicles yearly with 90% of those vehicles manufactured or assembled domestically. However, much of the country’s success in developing the domestic automobile industry has been facilitated by policies that have promoted local vehicle manufacturers. In the long term, these policies no longer serve as a benefit but now act as an obstacle to addressing global and domestic challenges, putting the sustainability of this industry at risk.
This, combined with vehicle manufacturers merging to achieve even higher levels of scale in response to the slow growth, value demolition and very big validation of the global automobile market, is placing serious doubts on the future of the automobile industry. Recognizing this new global environment, the National Automobile Policy (NAP) seeks to address the various issues and challenges and transform the domestic automobile sector to become a more practical, competitive and significant contributor to the economy.
The overall objective of the NAP is to create sustainable economic value creation in order to maximize the long term contribution of the automobile sector to the national economy, while at the same time benefiting the Malaysian consumer. The need to create economic value entails that the industry will continue to require supportive Government policies in order to become fully competitive internationally. The NAP therefore aims to facilitate the required revolution and optimal combination of the national industry into regional and global industry networks.
The importance of the transformation is determined by an increasingly liberalized and competitive global environment. Consequently, the Government has set out the following objectives for the national automobile sector, firstly is to promote a competitive and viable domestic automobile sector, in particular the national car manufacturers. Besides promote Malaysia as an automobile regional hub, focusing on niche areas and to promote a sustainable level of economic value added and enhance domestic capabilities.
Moreover to promote a higher level of exports of vehicles as well as components and parts that is competitive in the global markets. In addition to promote competitive and wide based Bumiputera participation in the domestic automobile sector and to safeguard the interests of consumers in terms of value for money, safety and quality of products and services In order to achieve these objectives, the government has taken a number of steps or rather policy thrusts.
The first of such thrusts is the condition of Government support and incentive based on sustainable economic contribution. Such Government support and incentives will be aimed at optimizing sustainable economic contribution, namely the scale of operations, extent of industry linkages, and the development of local and Bumiputera capabilities. The government will also support the increase of scale to enhance competitiveness, in order to create a leaner and more sustainable industry structure.
At the same time, the government will also promote the development of strategic linkages with international partners. The Government will encourage industry participants to collaborate with external parties to establish strategic tie-ups, as they will not only be able to share scales and resources but also open up opportunities and provide access for domestic industry participants to enter the global automobile supply chain and vice versa.
Furthermore, such strategic tie-ups also require domestic industry participants to adopt best practice management, processes and procedures to deliver on higher quality standards that are necessary in accessing international markets. Finally the Government also intends for Malaysia to become a regional hub focusing on niche areas and corresponding activities. By positioning Malaysia as a regional manufacturing and assembly hub by encouraging existing participants to make deeper their commitment in Malaysia.
Additionally, a number of specific policy instruments have also been put into place by the Government for the NAP. These policy instruments include excising the duty structure, gazette the values of imported cars, implementing an ASEAN import duty, providing for an industrial adjustment fund, issuing manufacturing licences and approved permits and finally streamlining vehicle type approval.
As a result of the implementation of these policy measures, the Government expects to see an industry with two strong national vehicle manufacturers, complemented by a number of foreign vehicle manufacturers potentially with local joint-venture partners who will upscale their assembly operations and at the same time rationalize the models assembled, to drive sustainable industry linkage. The government also expects to see the components sector becoming more possible there will be fewer companies but their volumes will be higher and more networked into the global automobile industry.
Regular liberalization will lead to reduced scope for importers, but valid distributors will benefit from the increased sales volumes. In this way, the NAP aims to provide a clear direction for all industry participants to enable them to make the optimal plans and investment decisions for the future. Any Government policies and measures introduced for the domestic automobile sector will be based on this NAP. The NAP will be a long term policy base for the domestic automobile sector subject to reviews and modification dictated by the global automobile industry environment. . 5 The regulatory bodies of PROTON, Malaysia Policies regarding vehicle emission, the environment and fuel economy are extensive and subject to frequent changes and scrutiny. Complying with this regulation requires extensive cost and effort. Therefore, in order to proactively anticipate any changes in regulatory requirements, domestic and abroad, the Group monitors this development to anticipate foreseeable requirements for future product development.
As the company progresses towards international exposure, Proton is faced with many risks relating to disclosure of intellectual property especially inconnection to licensing of IPR(intellectual property rights) in strategic projects. Appropriate measures are currently being taken in managing all aspects of IPR by establishing an IPR policy and issuing manuals for identification, protection and commercialisation of IPR. This effort will significantly bring maximum benefit to the organisation by return on investments and profits in the form of payment for licensing and royalties and at the same time the IPR’s are duly protected. . 0 ASSIGNMENT 2 2. 1 PEST analysis of automobile industry (worldwide) The PEST analysis of automobile industry I took it from the overall view in the worldwide market as all the countries will be facing the same scrutiny. In 2007, more than million motor vehicles, including cars and commercial vehicles were produced worldwide. In 2007, a total of 71. 9 million new automobiles were sold worldwide: 22. 9 million in Europe, 21. 4 million in Asia-Pacific, 19. 4 million in USA and Canada, 4. 4 million in Latin America, 2. 4 million in the Middle East and 1. 4 million in Africa.
The markets in North America and Japan were stagnant, while those in South America and Asia grew strongly. Of the major markets, Russia, Brazil and China saw the most rapid growth. In 2008, with rapidly rising oil prices, industries such as the automobile industry are experiencing a combination of pricing pressures from raw material costs and changes in consumer buying habits. The industry is also facing increasing external competition from the public transport sector, as consumers reconsider their private vehicle usage. 2. 11 Factors affecting the Automobile Industry (PEST Analysis) . 12 Political Laws and government regulations have affected this industry since the 1960s. Almost all of the regulations come from consumers increasing concerns for the environment and the concern for safer automobiles. 2. 13 Economic The automobile industry has a huge impact on every country’s economy. According to various studies this industry is the major user of computer chips, textiles, aluminum, copper, steel, iron, lead, plastics, vinyl, and rubber. The study also showed that for every autoworker there are seven other jobs created in other industries.
These industries include anything from the aluminums to lead to vinyl. 2. 14 Sociocultural Today’s society judges people on the type of car you drive. Society does not like to admit to this but it is very true. Manufactures know this happens and targets their markets by these thoughts. Anyone who drives a nice vehicle is thought to be wealthy. No one wants to be seen driving an unattractive piece of junk because of what other people will think of him or her. Consumers also just feel better when they are driving a nice or new car, if makes them feel better about themselves. . 15 Technology The internet has affected just about every industry in the world and has also had a huge impact on the automobile industry. A study was conducted by J. D. Power and Associates in 2002 and involved more 27,000 new vehicle buyers. The study showed that 60% of them buyers referred to the internet before making their purchases and out of that 60%, 88% went to the auto websites before going and taking a test drive. Business-to-business marketplaces have given the industry many opportunities because of the internet, such as more efficiency and lower cost. . 2. 6 Global (extra analysis) General Motors, Ford Motor Company, Daimler Chrysler, BMW, Volkswagen, Volvo, Toyota, Mazda, and Nissan Motor Company come together to create a new trade association created the Alliance of Automobile Manufacturers. The organization was to replace the American Automobile Manufactures Association that only consisted of American manufacturers, the goals of the associations were to work together on public policy matters of common interest to provide reliable industry information and data, and seek consistent global regulatory standards. 3. 0 ASSIGNMENT 3
Stakeholders and their roles in automobile industry Employees: Employees should all see where the is heading, and where it is heading towards otherwise they might see little point in changes in changes that have been made and may become suspicious. A work force that sees little relevance in what it is doing, or which sees that it is never able to reach set targets, will be far less productive, and may in-fact become demotivated, resistant to change and even disruptive. It is very important that the changes are explained clearly to employees and that any fear they may have are properly addressed.
Investors: Investors are important because the business relies on their investment to finance the decisions that it takes. They may, for example, become worried that the business has no overall direction and look for other places to put their money. They may not see the benefit of decisions, particularly long-term ones which could affect the amount they receive. If they are unhappy they could seek to replace the managing director, chairperson, or even members of the board of directors. This would leave the business weakened and prone to take-over. Shareholders:
They will be very interested in any decision that an effect the dividends that they receive is their share of profits. Any decision that will reduce profits, even for a short while, will not be popular with the shareholders. If shareholders are unhappy with the decisions made, they can voice their concerns at the Annual General Meeting, and even take a vote to replace members of the Board of Directors or the Chief Executive. This is something that the managers of the business would want to avoid, so they would have to consider how shareholders will feel about the decisions made.
Customers: Customers will be concerned if the decisions affect the price, quality, or service of the product, they may change their buying habits if the product does not meet their requirements. Suppliers: Suppliers will want to get regular orders with prompt payment – these may be affected by the decisions made by the business. For example, if there is a decision to increase production then more materials will be ordered from the supplier. He suppliers may then have to vary the period of credit and/or the level of discount offered to the firm.
If the supplier finds it difficult to provide the extra materials, then the decision may have to be change. Community: The community could be effected in many ways by the decisions made by the business. For example, if the business decides to expand, this could lead to more traffic, on the local roads and more pollution, or could mean the destruction of the local beauty spot, affecting local wildlife. The local community could be worried by such a development. They could form a local pressure group which could campaign against the expansion, or they could involve a large organization such as ‘Friends of the Earth’ to campaign for them.
The local council would come under pressure to stop the expansion from going ahead. It is important that the concerns of the community are taken into account when making decisions which will effect them, particularly when one of the objectives of the business may be social responsibility. Government: The government passes legislation which affects businesses, and so this will have to be taken into account when decisions are made. For example, the government recently increased the cost of road transportation through increases in the cost of road tax and fuel for lorries.
Obviously in terms of keeping costs down, the less distance the product has to travel by road to it’s markets the better, so the business may decide to move it’s factory nearer to it’s main customers. If the government decides to reduce the rate of income tax, consumers would have more money to spend and this could mean greater demand for the business’ product. The business will then have to decide if they want to expand, so it can satisfy the customer’s new demands. It is also important for the business that any decisions it takes are legal, otherwise they could be prosecuted.
The government can introduce legislation at any time to prevent what they see as undesirable actions by businesses, e. g. a firm gaining a monopoly position in a particular industry. Therefore it is important that businesses take into account what the government will approve or disapprove of when making decisions. Hereby I have chosen Proton Holdings Bhd to have a review on their stakeholders and their role in the industry. PROTON Holdings Bhd [pic] Dato’ Nadzmi Mohd Salleh as the Chairman for the company. [pic] Dato’ Haji Syed Zainal Abidin B Syed Mohamed Tahir as the Managing Director of PROTON
SENIOR MANAGEMENT [pic] Mohamad Shukor Bin Ibrahim Chief Executive Officer, Proton Edar Sdn Bhd [pic] Tajul Zahari Bin Abu Bakar Director, Engineering Division [pic] Hasnah Binti Ismail Director, Group Human Resource Division [pic] Claudius Meynert Director, Export Markets Division [pic] Michele Kythe Lim Beng Sze General Manager, Group Legal Division [pic] Dr Wolfgang Karl Epple Director, Group Quality Division [pic] Mohd Nizamuddin Bin Mokhtar General Manager, Group Secretarial & Compliance Division OTHER SENIOR OFFICERS [pic] Muhammad Aris Bin Anuar General Manager, Manufacturing [pic]
Zahari Bin Husin General Manager, Product Marketing [pic] Hazrin Fazail Bin Haroon General Manager, Product Planning [pic] Datuk Abdul Razak Bin K P Dawood Sultan General Manager, Group After Sales [pic] Peter Anthony Das General Manager, Marketing & Branding [pic] Dr Badrulhisham Bin Mohd Ghazali General Manager, Corporate Planning [pic] Muhammad Amyzaddin Bin Raya Senior Manager, Group Communications [pic] Low Pheng General Manager, Group Internal Audit [pic] Mohd Amin Bin Putih Senior Manager, Group Risk Management HEADS OF INTERNATIONAL SUBSIDIARIES [pic] Dany Bahar Chief Executive Officer,
Group Lotus Plc [pic] Brian Collier Managing Director, Proton Cars (UK) Ltd [pic] John Startari Managing Director, Proton Cars Australia Pty Limited [pic] Moses Tan Managing Director, Proton Singapore Pte Ltd [pic] Ricky Too Heng Keong President Director, PT Proton Edar Indonesia Overall view Board Executive Committee • Dato’ Mohd Nadzmi Bin Mohd Salleh – Chairman • Dato’ Syed Zainal Abidin B Syed Mohamed Tahir • Dato’ Michael Lim Heen Peok • Ms Vimala Menon • Dato’ Mohammed Azlan Bin Hashim Board Audit Committee • Encik Oh Kim Sun – Chairman • Tuan Haji Abdul Kadir Bin Md Kassim Dato’ Michael Lim Heen Peok Board Risk Management Committee • Tuan Haji Abdul Kadir Bin Md Kassim – Chairman • Datuk Tan Kim Leong • Dato’ Zainuddin Bin Che Din Board Nomination & Remuneration Committee • Dato’ Mohd Nadzmi Bin Mohd Salleh – Chairman (Appointed w. e. f. 1 January 2009) • Encik Ahmad Tajuddin Bin Abdul Carrim • Encik Md Ali Bin Md Dewal • Dato’ Michael Lim Heen Peok • Dato’ Mohammed Azlan Bin Hashim Board Disciplinary Committee • Dato’ Mohd Nadzmi Bin Mohd Salleh – Chairman • Tuan Haji Abdul Kadir Bin Md Kassim • Tuan Haji Abdul Jabbar Bin Abdul Majid • Tuan Haji Yusof Bin Ahmad
Auditors PricewaterhouseCoopers (Chartered Accountants) Company Secretary Encik Mohd Nizamuddin Bin Mokhtar (LS 006128) Investor Relations Encik Kelvin Low Stock Exchange Listing Main Board of Bursa Malaysia Securities Berhad 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%) 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 The roles and responsibilities of the Non-Executive Chairman and the Managing Director are clearly defined. The Chairman ensures the integrity and effectiveness of the Board as a whole. He conducts Board meetings and ensures that it proceeds in an orderly manner.
The Managing Director (“MD”) on the other hand is responsible for making, and ensures the implementation of, broad policies as approved by the Board and reports to and discusses material matters including regulatory developments and strategic projects with the Board. The Directors are required to make written declarations and it is their responsibility to declare whether they have a potential or actual conflict of interest in any transaction. Where issues involve conflict of interest, the interested Directors go without from discussing or voting on the matter.
The Board of Directors (Board) recognises the importance of sound internal controls and risk management practices to good corporate governance. The Board has an overall responsibility for the Group’s system of internal controls and its effectiveness, as well as reviewing its adequacy and integrity. The Group’s system of internal controls is designed to manage the principal business risks that may impede the Group from achieving its business objectives. The system, by its nature, can only provide reasonable but not absolute assurance against any material misstatement or loss occurrence.
The Directors of the Company are responsible for the preparation and fair presentation of these financial statements in accordance with MASB Approved Accounting Standards in Malaysia for Entities Other than Private Entities and the Companies Act, 1965. This responsibility includes:,designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making ccounting estimates that are reasonable in the circumstances. The Company Secretary who is available to provide the Directors with the appropriate advice and services and also to ensure that the relevant procedures are followed and rules and regulations are complied with and make sure The Board is, from time to time, updated, with any changes in the law, governance and other regulatory requirements. The secretary also must invite the Senior Management as well as professional and external advisors are from time to time to attend board meetings to deliberate and clarify issues on the subject matter concerned.
The Company Secretary shall be the Secretary to the Committee and shall be present at all meetings to record minutes. Minutes of each meeting shall be prepared and entered into the books provided for the purpose and sent to the Committee members and will be made available to all Board members. The minutes shall be signed by the Chairman of the Committee. The duties of the Board Audit Committee ( BAC) is to : (a) Review and report to the Board of Directors on the following:- • with the External Auditors, the audit plan; with the External Auditors, the External Auditor’s evaluation of the system of internal controls; • with the External Auditors, the External Auditor’s audit report; • the assistance given by the Company’s employees to the External Auditors; • the adequacy of the scope, functions and resources of the internal audit functions and that it has the necessary authority to carry out its work, and the performance of the members of the internal audit function; the internal audit programme, processes, the results of the internal audit programme, or investigation undertaken and whether or not appropriate action is taken by the management on the recommendations of the internal audit function; • the quarterly results and year-end financial statements, prior to the approval by the Board of Directors, focusing particularly on:- – changes in or implementation of major accounting policy; – significant and unusual events; compliance with accounting standards and other legal requirements; and – accuracy and adequacy of the disclosure of information essential to a fair and full presentation of the financial affairs of the Group; • any related party and conflict of interest situation that may arise within the listed issuer or group including any transaction, procedure or course of conduct that raises questions of management integrity; • promptly report to Bursa Malaysia Securities Berhad on any matter reported by it to the Board of the Company which has not been satisfactorily resolved resulting in a breach of the Listing Requirements of Bursa Malaysia Securities Berhad; • submit to the Board a Report on the summary of activities of the Board Audit Committee in the discharge of its functions and responsibilities in respect of each financial year. (b) Consider the appointment of the external auditor, the audit fee and any questions of resignation and dismissal.
The Group Internal Audit Division reports to the Board Audit Committee on matters concerning the Group and assists the Board of Directors in monitoring and managing risks and internal controls. The Group Internal Audit Division also reviews internal controls related to all key activities of the Group and recommends improvements in controls and procedures. They also are independent of the activities it audits and performs with impartiality anddue professional care. The findings of the Group Internal Audit Division are reported to the Board Audit Committee. The Board Audit Committee approves the internal audit plan of the Group Internal Audit Division each year. The scope of the internal audit covers the audits of all units and operations, including subsidiaries.
During the year, the Group Internal Audit Division serves to ensure internal control measures are adequate and effective in mitigating key risks and that they are monitored. The monitoring process will form the basis for continually improving the risk management process in the context of the Group’s overall goals. The Board Nomination & Remuneration Committee (“NRC”) is in accordance with the Terms of Reference as approved by the Board of Directors of PROTON on 26 July 2006. The NRC reviews new director appointments of the Group and the balance and effectiveness of the boards of directors, taking into account the required mix of skills and experience and other qualities, before making recommendations to the Board.
The Committee is empowered to conduct periodic reviews on the overall remuneration policy and package of the Executive and Non-Executive Directors and Senior Level Mission Critical Positions of the Group for recommendation to the Board. The authority and scope of coverage of the NRC is over the PROTON Group, which includes subsidiaries and relevant associate and other investor companies. The NRC is responsible for reviewing the performance of the Executive Directors and recommending to the Board the remuneration package and reward structure. The Board as a whole determines the remuneration of the Executive and Non-Executive Directors. Directors do not participate in any discussions or decisions concerning each individual’s remuneration.
In the case of the Executive Director, the remuneration is structured to link rewards to corporate and individual performance through key performance indicators comprising fixed and performance-based rewards. The level of remuneration of the Non-Executive Directors reflects the experience and level of responsibilities undertaken by the Director concerned. The Non-Executive Directors are paid annual fees and attendance allowances in accordance with the number of meetings attended. In addition, the Non-Executive Directors are each provided with the use of a car. Non-Executive Directors fees are paid upon shareholders approval at each Annual General Meeting.
The NRC carries out reviews when appropriate and refers to remuneration surveys and consultants to assist in determining the appropriate level of reward, which is competitive and consistent with the corporate objectives. This is necessary in order to attract and retain professionals with the qualities needed to manage the Group successfully. The Board Risk Management Committee (“BRMC”) assists the Board to oversee the overall management of all risks faced by the Group’s business.. The Group Risk Management Unit (GRMU) is entrusted with the responsibility for ensuring that an appropriate risk management framework exists within the Group and is effectively implemented to manage the key risks of the organization on an on-going basis. The GRMC, which comprises of Senior Management, is responsible for overseeing risk management implementation, egular updating of the Group’s risk profiles and improving the implementation of methodology for risk management. The Committee deliberates and determines the Group’s major risks to be escalated to the attention of the BRMC. The Board Disciplinary Committee (“BDC”) is a platform for the PROTON Group to deal primarily with disciplinary issues. The BDC is part of the structural mechanism for the handling of cases that may arise from the introduction of the Whistleblower and Assets Declaration Policies. The BDC has the power to initiate investigations, consider and take appropriate action on any case referred to it by any party either received orally or in writing.
The Board Executive Committee (“Board EXCO”) is to assist the Management in addressing issues relating to implementation and monitoring of several key projects, including but not limited to PROTON Strategic Business Plan, Annual Management Plan, PROTON Business Turnaround Plan and also to address issues relating to identifying suitable candidates to fill in several key positions for PROTON. It is to be noted that the functions of the Board EXCO shall not overlap that of other Board Committees, such as the Board Nomination & Remuneration Committee. The Financial Reporting Board is committed to providing a balanced, clear and meaningful assessment of the financial performance and prospects of the Group to shareholders, the investor community and the regulatory authorities.
Shareholders and other stakeholders are kept abreast of the Group’s performance through the timely announcement of the quarterly financial results and accompanying press releases. The Board Audit Committee assists the Board to oversee the financial reporting processes and the quality of its financial reporting. Quarterly financial results and annual financial statements are reviewed by the Board Audit Committee to ensure adequacy and completeness of information prior to the Board’s approval. To enhance quality of the Group’s financial reporting, the external auditors will be conducting quarterly reviews of the Group’s quarterly results in addition to the year-end audit.
Auditors’ responsibility is to express an opinion on these financial statements based on our audit. They conducted audit in accordance with approved standards on auditing in Malaysia. Those standards require that they comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error.
In making those risk assessments, they consider internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the financial statements. Dialogue Between The Company and Shareholders / Investors The Board recognises the importance of transparency and accountability to its shareholders and investors. Different channels of communication are optimised to provide shareholders and investors with a balanced and complete view of the Group performance and the issues faced by its businesses in the competitive environment amidst a changing landscape.
The issue of the Annual Report is an important medium of information for the shareholders and investors whereas the Annual General Meeting of the Company is the main forum for communication and dialogue with the shareholders. Shareholders are encouraged to actively participate and interact with the Board and members of the Senior Management pertaining to the items on the agenda during the general meeting. In addition, the Chairman briefs the shareholders on the Company’s operations for the financial year. Senior management and the external auditors are present to respond to questions and queries to ensure a high level of accountability and transparency of the business goals, strategy and operations.
The Board strives to maintain a good dialogue with shareholders and regular meetings are held with institutional shareholders throughout the year to discuss the progress of the Group, future growth prospects and strategy. In the course of the year the Board and Management has engaged in dialogue sessions with the Major Shareholders of PROTON and the representatives from the Malaysian Institute of Corporate Governance and Minority Shareholder Watchdog Group. Besides the Annual Report, the Board ensures timely announcements are made to Bursa Malaysia Securities Berhad and disseminates clear, accurate, and sufficient information to enable the shareholders and investors to make informed decisions.
The Investor Relations Unit also proactively disseminates appropriate and relevant information to the investor community and attends to whatever queries they may have. 4. 0 CONCLUSION As a conclusion or as the overall view on the automobile industry today compared to those times, we can see that this industry has grown up tremendously together with the technologies available. The automobiles do not create cars to be drive on the roads but also in the space, air, sea and also in the railways. They develop as time goes with creative ideas and even designs. The industry and area of commerce in which automobile models are planned, designed, manufactured, and marketed.
The automobile industry is concerned with profits and competition; with consumer demands for styling, safety, and efficiency; and with labor relations and manufacturing efficiency. This industry started with a steam-powered vehicle . Then electric automobiles with internal combustion engines Then in the Veteran era Then Brass or Edwardian era Then Vintage era Then Pre-WWII era Then Post-war era Then Modern era And the last is the nowadays car and the future cars The above shows the eras that the automobiles come through till today. We can see from just a steam car till to the automatic computer cars show the development of automobile industry. This industry has its manufactures around the world and their automobiles also are exported around the world.
However this automobile do have its advantages and disadvantages, whereby the do make life easier for the people by coming out with new technologies but at the same time it pollutes the environment wit its gases and also the consumption of the technologies, like for an example the usage of high radioactive power may lead to global warming. Therefore this industry has its future plans whereby they conclude people now have access to the best in terms of home appliances, offices and automobiles. Digital components have made life very easy for individuals. Things that were expensive at a time are now available within our budgets, and automobiles are one of those. There are certain situations that have bought sudden changes in the automotive industry. Unstable financial markets, rising fuel prices, and increasing taxes are some of the problems faced by the automobile industry.
Automobile users have not changed their approach towards purchasing fuel and petrol despite the growing fuel prices. Environmental issues are not important for auto users. They are unaffected by the rising fuel costs and are prepared to continue driving. Car manufacturers and dealers have seen a marginal loss in the sales of vehicles. There is an increase in used car sales and decrease in new car sales. Sales of automobiles are on the rise via the Internet. Manufacturers have to switch to the World Wide Web medium to increase the sales. Hence, there is going to be a massive increase in vehicle taxes, toll and parking charges. There is an immediate need to find an alternative to road use with a reliable and clean public transport.
While the government is trying its best, insurance companies are stable and earning a lot because of the competition in the automobile industry. Electronic devices have played a vita role in the automobile industry. There are huge numbers of electronic devices installed in automobile manufacturing plants. For example, cars are using electronic devices. Thus, listening to music in automobiles without interruption is just one of its kinds to explain the impact of electronics in the automobile industry. Telecommunication has also played a major role in the automotive industry. In recent times, this industry has been gaining more attention from car manufacturers. An average automobile manufacturing company spends thousands of dollars on electronic devices for every vehicle.
Increase in using electronic devices in automobiles is reflected in the form of entertainment systems, security features and safety devices. Some of the common electronic devices used in automobiles are: 1. Controlled Area Network: There are separate computers fitted in the vehicle. The Controlled Area Network allows these computers to communicate with one another. 2. Fuel efficiency: The rising prices of fuel have forced the automotive industry to manufacture fuel-efficient automobiles. New technology in automobiles has a unique function to switch between fuel and electronic engines. As prices of fuel have increased, there is an increasing need to switch on alternate sources of fuel. Water is one best source of energy. Researchers have proved that water can run cars.
Scientists also claim that energy extracted from water can be used instead of fuel. Water mixed with normal gasoline is another alternate solution. Automobile industry is trying hard to discover other technologies for reducing all these costs. References • http://en. wikipedia. org/wiki/History_of_the_automobile • http://www. automobileindia. com/indiaautomotive/automotive-technology. html • http://wapedia. mobi/en/Big_Three_%28automobile_manufacturers%29 • http://en. wikipedia. org/wiki/Automotive_industry • http://www. conservapedia. com/Automobile • http://www. wikinvest. com/stock/General_Motors_(GMGMQ) • http://en. wikipedia. org/wiki/IPR http://protonmotorsports. wordpress. com/ • http://www. google. com. my/search? hl=en&client=firefox a&hs=F1T&rls=org. mozilla%3Aen US%3Aofficial&q=automobile+industry+in+malaysia&meta=&aq=1&aqi=g-e1g9&aql=&oq=automobile+in&gs_rfai= • ^ Eckermann, Erik (2001). World History of the Automobile. SAE Press, p. 14. • ^ “1679-1681–R P Verbiest’s Steam Chariot”. History of the Automobile: origin to 1900. Herge. http://translate. google. com/translate? hl=en&sl=fr&u=http://users. skynet. be/tintinpassion/VOIRSAVOIR/Auto/Pages_auto/Auto_001. html&sa=X&oi=translate. Retrieved 2009-05-08. • http://www. google. com. my/search? hl=en&client=firefox-a&hs=kgo&rls=org. ozilla%3Aen-US%3Aofficial&q=automobile+industry+growth&meta=&aq=f&aqi=&aql=&oq=&gs_rfai= • http://www. google. com. my/search? hl=en&client=firefox-a&rls=org. mozilla%3Aen-US%3Aofficial&q=automobile+industry+analysis&meta=&aq=1&aqi=g10&aql=&oq=automobile+industry+&gs_rfai= • http://www. google. com. my/search? hl=en&client=firefox-a&rls=org. mozilla%3Aen-US%3Aofficial&q=automobile+industry+policies&btnG=Search&meta=cr%3DcountryMY&aq=f&aqi=&aql=&oq=&gs_rfai= • http://scholar. google. com. my/scholar? q=automobile+industry+policies&hl=en&as_sdt=0&as_vis=1&oi=scholart • http://www. google. com. my/search? hl=en&q=proton&sa=N&tab=sw • http://www. google. com. my/search? hl=en&q=perodua&meta=&aq=f&aqi=g10&aql=&oq=&gs_rfai=