National carmaker Proton unveiled a major restructuring that will allow it to expand its businesses to gear up for market liberalisation in two years.

Under the proposed revamp, a new company will be set up to take over Perusahaan Otomobil Nasional Bhd (Proton) and its listing status, the carmaker said in a statement to the stock exchange.

Proton will subsequently streamline its operations into three core businesses, namely manufacturing, marketing and ancillary services, the statement said.

All of Proton's existing shareholders will exchange their shares for shares in the new company o­n a o­ne-for-one basis.

Strategic step

The carmaker described the revamp as a "strategic step forward" that would transform it from a mere manufacturer of vehicles into a company with diversified products and services.

It will also pave the way for it to venture into new business opportunities to prepare for market opening under the Association of Southeast Asian Nations (Asean) Free Trade Area (Afta), Proton said.

"We are reorganising Proton to move forward to meet Afta challenges," chief executive Mahaleel Ariff told reporters.

He said there was a possibility that the new core businesses could be listed separately at a later date, saying "one or two sizeable units" were already ready for listing.

The revamp is expected to be completed before March next year and seen expected to improve the group's earnings.

Proton currently holds some 60 percent of the Malaysian market due to high tariffs o­n imported cars.

Immense pressure

This protection will largely disappear under Afta where tariffs fall to below five percent in January but Malaysia, the biggest car market in Asean with a 34 percent share, has delayed opening its auto industry until 2005.

Despite the two-year reprieve, analysts said Proton still face immense pressure from bigger, more established carmakers and may have to seek a foreign partner if it is to survive.

Sales are already slowing for the Malaysian carmaker, which reported a 10 percent year-on-year drop in sales to RM9.267 billion for the year ending March.

However net profit rose marginally to RM1.138 billion from RM1.122 billion a year earlier, it said.

Mahaleel has previously said Proton saw little need to form alliances with foreign automakers to stay competitive and has put in place plans for aggressive regional expansion under Afta.

Proton has built a new RM1.8 billion manufacturing plant that is expected to cut costs by 20 percent when operational at year-end.

It also expects to save a substantial amount o­n royalty payments when it begins using its own Campro engine, jointly developed with its British unit Lotus Group. AFP