ALAHAI PROTON

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CARS Malaysian car giant in drive to polish image

REUTERS

Oil money and British brains are the magic ingredients that will transform a Malaysian maker of rehashed Mitsubishi cars into a souped-up international brand.

Or so hopes Perusahaan Otomobil Nasional (Proton), maker of the stodgy Proton, driven by two-thirds of Malaysian car buyers.

Armed with know-how from the Lotus Group, in which it bought an 80 per cent stake five years ago, and the deep pockets of its parent, state oil firm Petronas, Proton is eager to shed its "bargain basement" image.

"Would the Proton/Lotus combination work to get a premium? The answer is 'yes'," said Proton chief executive Tengku Mahaleel Tengku Ariff, a rally car driver who spent 18 years at Shell before becoming chief in 1997.

British-based sports-car maker Group Lotus was founded in the early 1950s and enjoyed great success on the Grand Prix circuit. But despite its reputation for its ride and handling, financial difficulties have dogged Lotus and led to a series of takeovers.

Few car enthusiasts would mention Proton in the same breath as the Fords or Toyotas of the world but the car-maker sees itself joining the ranks of the world's car elite in five years.

It unveiled its first self-designed car, the Waja, in August last year and promises its own engine by 2003.

Proton is not just making plans for a second manufacturing plant but will have its own, Proton City, a development project that includes a test-drive circuit, a technology centre, a housing estate, a convention centre, hotel and recreational park.

The project, shelved during the Asian financial crisis, will be revived next year.

Anchoring the project is a 1,600-hectare plant that will allow Proton to double its production capacity of 230,000 units a year.

But Proton detractors are less sanguine about its ambitions.

Many have tipped the state-controlled car-maker to be the loser when Malaysia opens up its market in 2005 to allow foreign car-makers.

The scepticism is not surprising as the state-controlled firm has mainly produced rehashed Mitsubishi cars during its 16-year history, making little impact outside its protected home market.

Proton was started in 1985 to fulfil Prime Minister Mahathir Mohamad's dream of a national car. To give it a head start, the government slapped tariffs of up to 300 per cent on imported vehicles.

The strategy worked.

With foreign brands out of most buyers' reach, Proton cars quickly became top-sellers in Malaysia.

Today Proton makes two-thirds of the average of 300,000 cars sold in Malaysia each year and employs about 10,000 workers.

And it can rest in the shelter of protectionism until at least 2005.

But when the tariff walls tumble, Proton looks certain to lose market share at home, analysts say, underscoring the urgency for it to tap the export market.

Judging by its export performance so far, Proton has a long way to go.