Some people at Proton must have been having sleepless nights these past weeks. Everything the management and board did turned sour. The future of thousands of Proton staff and workers are at stake. Two bad news item in one week is enough to spook investors to ditch Proton shares, and fall it did. It seems that small shareholders in Proton have a fundamental disagreement with Proton management.

The small shareholders voted with their feet, no collaboration means no future value for Proton, it would burn out its capital until no value is left. The management and board want independence, because it is a national entity, while asking for support and collaboration from Volkswagen.

While VW wants control in decision-making and operation a takeover in short. From the commercial point of view, the reason VW was talking to Proton in the first place was to gain a sizeable market share in a growth market - Asean. If VW want to build brand equity, it must churn out a quality reliable product, a product that consumer can trust and for which the investment would be huge. As such, it is understandable that VW wants nothing short of a takeover. Would you invest your money now, not get any returns for the next few years, and when the project starts to bear fruit in 10 years time, let someone else reap the dividends? Without majority board control, VW would run the risk of being sidelined later.

Would Proton be able to compete in deregulated auto market without outside collaboration? The country's industrial might and reputation is at stake here, and the stakes are getting higher by the day. If you read industry news, DaimlerChrysler and Toyota have invested US$1.2 billion each in computerised manufacturing systems designed by Dassault Systeme whereby they can cut the time taken from design to prototype stages from three years to four months.

This would involve complete collaboration between a carmaker and its suppliers, because any new design, whether in shape or material, has to be tested for compatibility like flexing and bending. Instead of building the component prototype and testing it, the computer system can predict and give compatibility result. So in the not too distant future, you can expect to be able to design your own personal car on a company's website, pay for it and have it delivered to your place in a few of months.

The success of the VW Beetle and Chrysler PT Cruiser shows that a car can be fashion statement, and this is where you get the juiciest margin.

Would Proton be able to go down this road on its own? I doubt it - its market share is just too small to justify the investment needed. Toyota churns out over a million cars each year from its plants in many countries.

The other choice is for Proton is to downgrade a bit; just be contract assembler or manufacturer for other car companies. But then again I guess there are other players in this category - Naza, Oriental Motors and Tan Chong Holdings among others.