Malaysia Looks Beyond Japan for Car Technology
International Herald Tribune
August 11, 1994
Michael Richardson 

Malaysia, disillusioned at Japan's reluctance to transfer motor-vehicle technology and concerned at the rising cost of Japanese component imports, is looking to Western suppliers to help develop its car industry.

European companies, whose products have become increasingly competitive with Japanese goods with the sharp rise in the value of the yen, are likely be major beneficiaries of the new Malaysian policy, officials and analysts say.

Spurning traditional Japanese suppliers, Perusahaan Otomobil Nasional Bhd., Malaysia's main carmaker, said recently that it planned to buy car parts from European and American firms offering lower prices.

Although majority held by Malaysian government-controlled entities, the company is 17 percent owned by Japan's Mitsubishi group and continues to rely heavily on Japanese technology and parts. It was established in 1983.

Officials said the company had already started negotiations with PSA Peugeot Citroën SA in France, Daimler- Benz AG in Germany and General Motors Corp. and Ford Motor Co. in the United States.

Perusahaan Otomobil Nasional was formed in 1983, and its Proton cars now hold nearly 74 percent of the Malaysian passenger vehicle market.

The company plans to start exporting the Proton to the rest of Europe after strong sales in Britain in the past couple of years, but it is worried at the same time that a rapid rise in the costs of Japanese components over the past year may reduce the appeal of the car as a value-for-money buy.

Last month in Paris, USPD Bhd., a newly incorporated Malaysian company, signed a memorandum of understanding with the French company to make cars in Malaysia.

"Citroën appears to be more willing than Mitsubishi to transfer technology to Malaysia, particularly the engine and transmission systems," an analyst said Wednesday.

USPD is a joint venture between Perusahaan Otomobil Nasional and Diversified Resources Bhd., which assembles a Proton sports model and acts as Citroën's assembler and distributor in Malaysia.

Mahathir bin Mohamad, the Malaysian prime minister, and his French counterpart, Edouard Balladur, were present at the signing.

Mr. Mahathir said that although Malaysia wanted to retain its relationship with Mitsubishi through the Proton program, "we also want to learn from the French, for instance in design, sophistication and so on. We don't want to remain bound to one source."

The development of a national car industry is a key part of his government's plan to make Malaysia a fully industrialized country by 2020.

In March, Mr. Mahathir singled out Mitsubishi's reluctance to allow Malaysians to produce the engine and transmission parts for the Proton by themselves and warned that Kuala Lumpur could turn to European or American companies if Mitsubishi continued to drag its feet.

Yahya Ahmad, USPD's chairman, said the formal joint-venture agreement with the French company would be signed in October.

He said that the joint venture planned later to make the country's first car with a locally produced diesel engine using French technology.

The joint venture is intended to manufacture cars that will fill a gap between the more powerful Proton range and a new small car with a Japanese engine that is due to be launched for sale in Malaysia this month.

This car, known as the Kancil, is being built by Perusahaan Otomobil Kedua Bhd., a joint venture between Malaysian and Japanese companies in which Japan's Daihatsu Motor Co. has a 25 percent interest.

After Mr. Mahathir's criticism of Mitsubishi in March, Kentaro Shimizu, general manager of Daihatsu, said he had given assurances that the transfer of technology to Malaysia in the small-car project would be faster than for the Proton program.

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