Friday, July 30, 2010

Gradual Removal of Subsidies, A Good Thing

The gradual removal of subsidies, such as those for petrol, liquefied petroleum gas and sugar, is a good thing. Yet, on Wednesday this week, Opposition political parties threatened mass demonstrations if the Federal Government does not back down on cuts in subsidies.

How ironic. Opposition politicians tend to be quick to accuse Federal Government politicians of buying votes. Yet, their threat to hold mass protests can be looked upon as their indirect promise of handouts for votes.

If the Opposition truly aspires to form the next Federal Government, then they really have to do a better job at being principled.

In principle, subsidies should go only to the deserving and not into the pockets of the well-to-do. Cutting back on subsidies that are not targeted at the poor is THE way forward. Holding on to subsidies given indiscriminately is not sustainable and encourages wastage.

The quicker the Opposition takes this position, the better it is for the rakyat. Sadly, they appear to have seized the opportunity to advance their own political agenda of forming the next Federal Government instead of pressing for what's best for the rakyat, which is the gradual removal of subsidies given indiscriminately.

Arguing that corruption must be removed before subsidies can be withdrawn is a faux pas, for the obvious reason that it smacks of self interest. Tackle corruption as it must be tackled, and tackle the need to remove subsidies given indiscriminately in its own right.

Indeed, the Federal Government should be pressured to reveal what it plans to do with the savings from the subsidies cutbacks. And the person to be pressured most is the architect of that savings plan, Idris Jala. The success of the savings plan from cutbacks on subsidies must be worked into the Government's score card clearly for all to see.

That should be the way forward, if the Opposition is earnest about caring for the well-being of the rakyat.

What it should not do is take to the streets with the ultimatum "reverse cutbacks or else!" Not only is it self-serving, it is also self-defeating.

The Federal Government is not averse to doing what is popular. If there is enough pressure, the Government will give back the subsidies it has taken. And while the Opposition would thump their chests and take the credit for it, in the end, everyone loses.

Wednesday, July 28, 2010

Say No to Perodua-Proton Merger

When you're No. 2 in the market and trailing behind by a fair margin, you can become No. 1 by being better at the game or you can change the rules of the game. In the case of the proposed Perodua-Proton merger, it would appear that Proton seeks to change the rules of the game instead of being better at selling cars.

Why in heaven's name would Perodua want to merge with Proton, when Perodua is doing quite well without Proton's help? Well, according to proponents of the merger, there would be economies of scale to be gained. Also, Perodua's plant is maxed out and can't produce cars fast enough for the domestic market, whereas Proton has a lot of extra capacity at its Shah Alam and Tanjung Malim plants.

While the argument of economies of scale looks good at face value, the fact of the matter is, economies of scale can only be reaped if both Perodua and Proton cars share a lot of common parts, which they don't. Unlike European marquees that have taken the modular approach to producing new cars, Perodua and Proton cars are built on almost entirely different platforms.

As for taking advantage of Proton's extra capacity, well, that does not require a merger to happen. Proton can simply rent out its spare production capacity without merging with Perodua, something that's been done by other car assembly plants in Malaysia since the 1980s.

One example was the Volvo plant that produced the Volvo 244, which also produced Alfa Romeos back in 1982.

And the fact that neither Perodua nor Proton cars are doing well in the export market will not be helped by a merger of the two. Neither manufacturers are able to produce cars that are good enough to trump the competition in the open overseas market and should really focus on producing cars that overseas buyers want instead of trying to make life more difficult for each other.

The truth of the matter is, mergers between two companies often result in the destruction of one company at the benefit of another. Both companies would come with different systems and cultures, and the quickest, most efficient way to get the newly merged entity going is by subsuming one company under another.

Would Proton be willing to let Perodua's management team take over the newly merged company, imposing Perodua's sytems and culture onto Proton's people? You can bet that Perodua is not going to let the reverse happen without a big fight, considering that its systems and culture are the things that make Perodua the success it is today.

So, it's not just incompatibility at the production material level that's a big obstacle to the merger. Incompatible or rather competing cultures and systems also form large obstacles to the proposed merger.

As a consumer, I'd be willing to see a merger, provided that Perodua comes out on top. If Proton takes over Perodua, then I'd really be worried about buying Perodua cars. I'd have to expect Proton quality instead of the current Perodua quality.

Yes, I can talk, because I've owned both makes and so have my extended family members. In my humble opinion, Perodua tends to make better cars. And looking at the domestic car market in which Perodua is at the No. 1 position, more consumers appear to agree with me than those that don't.

Then again, I really hope the merger does not go through at all because competition is good for Malaysia's domestic market. With so much protectionism, competition ensures that both Perodua and Proton stay on their toes to produce quality cars. Remove that competition and Proton would be even more complacent about not having to compete in an open market. And the same can happen to Perodua, in that remove Proton from the equation and Perodua might just become complacent enough to start producing low quality cars.

So, let things be the way they are for now. Let Proton struggle with its overcapacity. It'll teach it to work hard at enhancing its product line, such that it does regain market share through tenacity and innovation, and not backroom deals.

Friday, July 23, 2010

Feeling Betrayed by Ford

"Good-bye, my darling". These were the painful words I uttered when I handed the keys to my Ford Focus S2.0 to its new owner. God knows, I loved her so much. I identified so closely with her, such that she became part of my pride and joy.
So, why did I get rid of her? Oh, a little something to do with reliability and affordability.
You see, when it comes to low quality cars like Proton, you'd expect it to be addled with problems that necessitated repairs often. While that shouldn't be the case, at least the repairs won't amount to the cost of an arm or a leg often - I know because I've owned two Proton cars before.
With the Ford Focus, almost every repair costs thousands if not close to a thousand ringgit. And the straw that broke the camel's back for me was the destruction of the Focus' gearbox at only about 80,000km, costing me around RM13,800 to repair.
Yes, I'm paying for performance. But no, I shouldn't have to pay through my nose if the Focus were a little more reliable and the supply chain for spare parts were a little better managed.
This is Ford car for goodness sake. It's supposed to be about affordability and reliability.
If I wanted to spend on maintenance like how I would have to spend on a luxury marquee, I'd have bought a BMW or a Mercedes, or a Lexus. I wouldn't have gone with a Ford.
Performance? The Focus S2.0's performance is really nothing to shout about.
Having owned a Ford Focus S2.0 for more than 3 years, I can tell you for a fact that the car is fast, but not that fast - the Honda Civic 2.0 can outrun it any day.
The Focus takes corners well, but really, how many times a day would anyone like to drive like a madman around corners, risking life and limb?
No, the Focus' performance, relative to other expensive cars to maintain, is rather 'so-so'. Hence, I saw no reason to keep paying for a so-so performance car at performance car repair costs.
In fact, I feel so betrayed by Ford regarding this matter that I can't stand to look at another Ford Focus. If I see one, I'd feel such revulsion that I'd have to quickly look away.
For that matter, I also can't stand all things Ford now. Ask me about Fiesta or the Ford Ranger or the Everest, and I'd tell you: "Ford? Yuck!"
Thank you, Ford, for making me part with my darling Focus and for making me hate you.

Wednesday, July 21, 2010

Proton at No 2 Spot Despite Frost & Sullivan Awards

It's so funny. Despite having won Frost & Sullivan Awards, Proton manages to screw-up by coming in as No 2 in a domestic car market that's protected mostly for Proton's sake!
Compact car maker Perodua retained its leadership with a market share of 31.5 percent, followed by Proton with a distant 26.6 percent share. Japanese car maker Toyota Motor Corp secured 14.8 percent of the market, followed by Honda Motor Co with 7.4 percent and Nissan Motor Co. with 5.8 percent.
It's hard to feel sorry for Proton. With so much bad publicity on poor quality control and over pricing, it's hard for Proton to get back its No 1 spot. And really, Proton is largely to blame for its own fate.
After 25 years of being in the business of making cars for Malaysians, it ought to be able to compete confidently in the free market already, thus allowing Malaysians at large to benefit from competitive pricing and higher quality services. Yet, Proton continues to hold the rakyat back, forcing us to pay more for cars in general.
What Malaysians ought to be asking is whether this is the best way for a government linked corporation such as Proton to return shareholder value? If MAS can compete with Air Asia and other international airlines, and still provide good returns to the government, why can't Proton, which has been around long enough, do the same? If PETRONAS can compete in the open downstream market without protection from international competitors, why can't Proton do the same?
This is not about national pride. This is about economics and commerce, and the future income for the government of Malaysia as well as the well-being of the rakyat moving forward.
Addendum: On the upside, Proton is pretty smart in producing the red Exora with nice looking trimmings. While I'm against Proton in many ways, someone like me who is partial to red cars can't help but notice....

Tuesday, July 20, 2010

When Even an Old Kancil Will Do

After having to make do with just one car for nearly three months, I now know exactly how valuable a second car is. It's so valuable that without it, you can literally go insane.
Imagine having to lug your two kids to school in the morning, along with two dogs in the back seat, with a tired and bothered wife (or husband if you're female) sitting next to you. Imagine doing that five days a week for nearly three months.
Drive you and everyone else in your family (including the dogs) nuts, yes? Well, that was pretty much the case with my family. Having sold off my Focus in anticipation of getting my new car, which turned out to be very late in arriving, my family had to endure the hardship of getting around in just one car.
It got so bad that, on some days, I wish I could fly instead. And when I looked at people with very old cars, I considered them to be very lucky indeed.
So much so, I seriously contemplated spending RM5,000 to buy an old Kancil. That would have been preferable to having to go through the motions of dragging the family about in just one car, five days a week, for nearly three months.
But what would be the point? As soon as my new car gets delivered, the old Kancil would just rot away by the roadside, to be used only when absolutely necessary.
Still, there were days when I thought, "What the hell? Let's just do it."
My motivations? Seeing my wife's behaviour changing from calm and happy, to nervous wreck bordering on abusive; seeing my kids coming home lethargic and unmotivated to study and even play; and seeing my dogs growling and barking aggressively in the car because they get squashed between my kids.
Thank God, my new car arrived just before all hell broke loose. Now that it's here, our lives are slowing getting back to normal or becoming tolerable and even enjoyable - even the dogs appear happier.
Still, this experience has taught me the importance of having a reserve car. As soon as I'm able to, I'm going to get a third car. And it doesn't matter if it spends most of the time parked by the roadside or under the tree outside my house. At least, it'll be there when my car becomes unavailable for whatever reason.