P es and cement had ae Particularly du othe slowdown in the consesrten Sone BE CaF mthet also shrank considerably wad ee aan Otomobil Nasional Sdn Bhd (PROTON) was zs Planned volume of production. Similarly, the production hhard times. A total of approximately 54% of the developed rial lots were sold. As for the residential units, 70% of the low ts and 80% of medium cost houses were sold, nine with the objective of achieving vertical integration in the reycle industry, a new company named HICOM Diecastng Sdn ‘was formed during the year to manufacture die-cast pars for eycle and automotive components. Approval was also granted ‘Government for HICOM to implement the Engineering Complex Which would provide modem facilities to undertake forging, ‘and machining of components and other industrial uses. ei J Soin bd oa pied len el see a vrais emotes eritee published reference materials: HICOM 1987 Annual F Mihatir Forced to Salvage State Firm,” Asian WallN AN ASIAN CONTEXT h tn yen 3 Mi 7 iiewed to improve their performance. Due to of the domestic market, the HICOM Group of on an aggressive export programme to market given significant boost to the nation’s slugs developments are expected to esl in increased ‘manufactured by the HICOM Group of Cor ‘concluded the Chairman's report was shortlived: On Asian Wallstreet Journal, in a special report exclusive that Prime Minister Mahathir Mohamad “had cast e” in state-owned HICOM, his brainchild. Finance Minister, Datuk Daim Sainddin, disclosed was to strip ownership of a MS1.2 billion (U.S.$465 from HICOM as part of a plan to salvage the ailing s, the minister confirmed that Japan’s Mitsubishi group ‘over management of Malaysia's controversial national ICOM, Mitsubishi Motors Corporation and Mitsubis30% of loss-making Perusahaan Otorti which produces a car called Saga. ICOM empts by HICOM officials © ol of the projects were futile. ,"but somebody has to payment revamping strategy of HICOM surfaced in August emen Ee escssing of Poses Teron Sdn ‘owned and operated a steel mill on the east coast er plagued by production problems and a huge yen bt /, which recorded an affer-tax loss of M$157.7 million March 31, 1987 was 51% owned by HICOM, 30% by um led by Nippon Steel Corporation, and 19% by a concem. ‘was most in need of urgent attention. In 1987, the market for billots led Perwaja’s management to generation of additional ‘was the company's export drive whereby @ substantial ial production for the year exported to a neighbouring ¢, with the collaboration ets from Perwaja were converted into st! PO to the inteational market. Besides high tensile and210 BUSINESS POLICY IN AN ASIAN CONTEXT rild steel grade billets for supply to both foreign and domestic customers, Perwaja also, produced low carbon steel grade billets for supply to boy ‘foreign and domestic customers. As and when possible, off-peak hours operations were adopted for the steel melt shop in order to cut down on the cost of electricity for billet production. ~ Perwaja’s steel mill, however, had more trouble than most HICOM Projects. Shortly after its establishment in 1982, the company awarded a " tumkey contract to Nippon Steel to build the plant. The mill had two main ‘components: a direct reduction plant to produce hot briquetted iron (also ‘known as sponge iron) and a steel billets used in making reinforcing bars, wire, and other steel products. — Nippon Steel used a new process that had never been tested com- | the direct reduction plant, From the time the mill opened in “melt Due to unresolved technical problems, Nippon Stee! ss the performance tests for the direct reduction plant 87, Perwaja closed down the direct reduction plant and Of the direct reduction plant, the Perwaja facility had , billets from the melt shop component put had not approached the shop's planned Output as of 1988 was at an annual rate © of Perwaja’s heavy debt-service burden lt shop continued to lose money at a rate of Tan Sti Jamil, however, aside from sure of the direct reduction plant was economic conditions ha ‘cheaper than that of hot briquetted Na study of the necessary modifi- ‘eel melt shop operation with the ‘Steel-scrap as a strategy 10 improve d by its large yen debt as the value of © Malaysian dollar. In its 1987 -13 million to service its debt. InHEAVY INDUSTRIES CORPORATION OF MALAYSIA BERHAD 1, 1988, Perwaja refinan, 5 billion yen debt with new 2 wed 45 billion yen (U.S.349 million) of its ngs guaranteed by HICOM and the ‘grew increasingly unhappy with the company's M management. Several studies were commis. ‘0 a meeting with Dr. Mahathir over the fate of executives were viewed as bureaucratic and fomotive and heavy-equipment concem. He was also chief executive of Edaran Otomobil Nasional Bhd, or EON, PROTON’s marketing company ‘that was 45% owned by HICOM, and had previously taken trouble-shooting i likewise, a member of Datuk Chia left his UMW post to take the Perwaja job, Associates fhe had also sought to resign from EON. _In preparation for the development of a salvage strategy for the stecl t, the businessman moved to Perwaja's plant site to study the mill's before proceeding with any reorganization and the formation of management team, Executives familiar with Perwaja expected priority to be given to getting Nn um output of steel billets, using local and imported scrap iron to the project's cashflow. Malaysia's economy was expected to grow adjusted 5% to 6% in 1988 and the resumption of public gle construction was anticipated. Thus, the rise in the demand for kewise, expected. ce a squeeze on supplies. One executive an additional 250,000 to 300,000 could supply. Improving efficiency ed to use mainly hot briquetted iron duction plant — required several§ counter measures in 1987. During the period, PROTON ; market base through exports. The Marketing Di uips were appointed in a number of countries and Sagas were exported 10 Bangladesh, Brunei, Malta, addition, preparations for export to the U.S. market the increase in costs due to yen appreciation, PROTON its raw materials and wherever possible CKD parts The company, in fact, began to reap some initial uch resourcing. In addition, PROTON also looked into its spare parts for other car manufacturers locally and i oy 1987, the Research and Development Division was kept ul major activities. OF mote were the preparation for the Hl-line model, cosmetic changes to that year’s model and s on the export models.Bricklin Industries subsidiary tat is the parent of Yugo . and PROTON America, Inc. to the New York-based invest- bor Nugent & Co. Bricklin Industries executives maintained fe of the company’s founder in the U.S.$40 million buy- wncially strengthen the concerns distribution arrangements for fer the agreement between Bricklin and PROTON, production of Sagas was 10 have begun in October 1988 for initial delivery “USS. the following month. But Bricklin didn’t expect to start its a ee an on, traditionally a slow period for35% owned by HICOM, as 31, 1987, to private investors. Finance er warits to buy into Kedah ‘executive. “He wants to sell ted of its steel, car, and cement | be reduced to a minor concem eral motorcycle parts venturesHEAVY INDUSTRIES Copp, principal Subsidiary Compan OF MALAYSIA BERHAD ee NAME OF COMPANy GROUPS —— INTER REST PRINCIPAL, ACTIVITIES ‘he Heavy Industries Parton of Valayon \dentfcation, initiation, zee Planning, implementation, and Berhad. management of projects In the field of heavy industries. 51% Manufacturing and sale of hot briquetted iron and steel bilets. Production and sale of spiral Welded high pressure stool pipes. 25% 70% Manufacturing, assembling, and sale of motor vehicles and accesories, 90% Manufacturing and sale of motorcycle engines. 80% Manufacturing and sale of rmotoroyele engines. 30% Manufacturing and sale of motoreycle engines. 51% Property development 51% Property development 100% Property holding: and used motor ast Sale of re cesar. vehicles and processing and sae of comersus BUSINESS POLICY IN AN ASIAN ‘CONTENT Exchibit 2 OF MALAYSIA BERHAD HEAVY INDUSTRIES CORPORATION BOARD OF DIRECTORS ‘AUDIT COMMITTEE PRESIDENT INTERNAL| | CORPORATE: AUDIT PLANNING DIVISION DIVISION EXECUTIVE COMMITTEE, VICE PRESIDENT Management Specific Finance & Project Services Studies Accounts | | | Development Division Division Division Division Engineering] | Secretarial &Research| | & Legal Division Division Operations Divisionss, year endeq ee [SS ae Ms‘000, vee | 1007 1000 open Revenue ere MOE | 910 _ i aise | ose _ 75s (1088) PROFIT FROM iy ‘OPERATIONS: share of losses less (249,884) (145,857) rofis of associated leas ‘companies (e414) (12697) 2 4 (08s) PROFIT BEFORE. =| waren tea aes eae } 4.224 ‘087 ) PROFIT AFTER TAXATION map shareholders’ (292,22) (165651) | (1817) 228 120,069 63,17 : : PROFIT. BEFORE DINARY ITEMS (162,153) (102,474) 20 or 44400 (1.416) (LOSSYPROFIT FOR YEAR ATTRIBUTABLE THE SHAREHOLDERS THE COMPANY (117,759) (19390) | 19.150 228 LATED LOSSES) TAINED PROFITS AT re oo adjustment - (paces) 16262 | 20559 28,331 See ee \TED LOSSES) i ‘ (206.961) (68828) 4670928 OF YEARBUSINESS POLICY IN AN ASIAN CONTEXT Exhibit 3 (Continued) 200 Fetained by: 25112 17,759 | 46,709 28.589 The Company (181.705) (83.471) : 2 (49,708) __ (22,016) S : (206,81) (88,628) | 46,708 28.559 SOURCE: HICOM Annual Report, March 31, 1987 Exhibit 4 HEAVY INDUSTRIES CORPORATION OF MALAYSIA BERHAD Balance Sheets as of 31 MARCH 1987 GROUP COMPANY. 1987 1986 | 1987 sooo __Mgo00 | Ms;000 © Ms'000 ASSETS EMPLOYED: CURRENT ASSETS ‘Stocks 198,004 134,507 ‘ Land and development ‘expenditure 164,271 164,470 : ‘Short term deposits 349,062 156,955 | 50,560 Trade debtors 26,721 14,184 $ Other debtors and ‘prepayments | 249,584 27,206 | 10,267 Future income tax benefit : 41059 i. Bank and cash balances 2,784 baat ee 925,916 504,192 | 61,199 CURRENT LIABILITIES Trade crediors 389, eter creditors and accruals reel wear 2,259 faxation , r 7140 4955 | “sai Bankers acceptances 5 Deferred and term liabilities paw i ; ~ portion repayable within 12 months sen.sse 105.741 | 147 499,187 350,176 | 3,397Exhibit 4 (Continueay “Net CURRENT ASSETS, 492,159 ee ATED COMPANIES seat? 8 185,246, 68 ‘SUBSIDIARY COMPANIES, Share INVESTMENT IN UNQUOTED, . aed CORPORATION cost 1,600 DEFERRED FOREIGN 4 hag BICHANGE Losses ©2151 456607 DEFFERRED EXPENDITURE 24928 7 26se 4208 ee eee eee 2306; 986 2040781 | 688,200 abi 201 $38,898 830,609 | 08,208 330,608 36,882 36,882 (206.381) (68,828) | 46,700 23,550 169,999 278,863 | 995,607 959,168 24447 112,977 : é REPAYABLE 12 MONTHS 2,112,113 1,648,951 | 202.689 2,059 2,905,959 2,040,791