That one time when Proton and Dr. Mahathir were conned into a USA-export deal

Hans/Aug 02, 2020 07:00 PM

If you grew up in the ‘80s, you would know that our first Proton Saga was developed from the Mitsubishi Lancer Fiore. A couple of months ago, I shared that the Proton Saga had not one, but two little known distant American cousins – the Dodge Colt and Plymouth Colt.

Mitsubishi Lancer Fiore, the donor car

It is only fitting for the post to be followed up with story of Malcolm Bricklin, a name of you will not find in Proton’s official history, the man who promised Dr. Mahathir that he will make the Proton Saga into one of the top-10 best sellers in the US, and Mahathir believed him.

A master hustler, Bricklin is one of the few men who can claim to have outwitted Tun Dr. Mahathir, and know how to manipulate Dr Mahathir’s desperation to turn Proton into a success story amidst a bad recession.

The story of Proton’s attempt to export the Saga to the US is a saga of deceit and financial trickery, involving power brokers of the highest level of the government, including USA’s former US Secretary of State, Henry Kissinger. Yes, the man who served under President Nixon had a hand in the Proton Saga’s export deal, and this was how it all played out.

Born in 1939 to a working class family in Philadelphia in USA, Malcolm Bricklin’s first business was selling franchise rights to his Handyman chain of hardware stores, which investors later found out was riddled with accounting frauds. He was sued and declared bankrupt at the age of 26.

But Bricklin is like a proverbial cockroach, he won’t die. He responded by hustling harder and ventured into an entirely different business – automotive.

In 1965, he got in touch with Innocenti, the Italian company that made Lambretta scooters.

Innocenti had made a bad judgement on American demand for scooters and was left with a huge stock of unsold Lambrettas. Bricklin has since rebranded himself into a ‘consultant’ and made a deal with Innocenti, taking over all their unsold stock.

Somehow Bricklin managed to sign up enough dealers to take on the Lambrettas. True to his hustling style, he visited dealers in a rented Rolls-Royce.

Subaru 360

Whether he actually made money from the deal or not is immaterial, because he would use that success story to pitch to Fuji Heavy Industries (FHI) – the parent company of Subaru, for his next deal.

But before Subaru cars came into the picture, he convinced FHI to allow him to import the Fuji Rabbit scooters into the US. He would later build upon that deal to import Subaru cars and with that, he founded Subaru of America in 1968.

This was the late ‘60s. The Subaru cars in question were not the all-wheel-drive Legacy, but the tiny rear-engine 360cc two-cylinder air-cooled Subaru 360 – basically a Japanese VW Beetle but a lot smaller.

As expected, introducing a Japanese kei car into the US was a disaster. Subaru of America was on the verge of bankruptcy and desperate to gain credibility, Bricklin tried to convince the former President of Ford Motor Company, Bunkie Knudsen to join him.

If you thought his ruse of meeting Lambretta dealers in a rented Rolls-Royce was comical, Bricklin arrived at Knudsen’s home in a helicopter, landing on Knudsen’s house’s lawn. Knudsen saw through the lies and nothing came out of their meeting.

Meanwhile, a lot more financial misconduct was happening at the sinking Subaru of America, which later found its lifeline in the form of a new investor – the Koffman family, who extended a line of credit to the company but under one condition; Bricklin had to go.

So in 1971, Malcolm Bricklin, the founder of Subaru of America, parted ways with the Pleiades star cluster Japanese brand.

Is this the end of Bricklin? Not yet. Far from it. Bricklin moved across the border, this time with his sights aimed at the Canada’s New Brunswick provincial government.

A master salesman, Bricklin was the embodiment of someone who could sell ice to Eskimos. He had no experience in car manufacturing, but somehow he convinced the Canadian state government to loan him USD 5.5 million and be given land to build his ‘Bricklin Safety Vehicle, or SV-1 for short.

Bricklin SV-1

He only had one hand-built to show but that was all he needed for his sales pitch. He got the land and the money, but as expected, he couldn’t deliver. Once again, Bricklin was declared bankrupt.

He returned to the US, at about the same time Fiat was pulling out of USA. He founded International Automobile Importers (IAI) and repeated with Fiat more or less the same tricks employed on his previous Lambretta deal.

Having established a relationship with Fiat, he ended up getting connected to Yugoslavia’s Yugo, which made rebadged Fiats.

With Yugo, Bricklin found an under-served niche in the US. The Yugo was then the cheapest car on sale in the US and was his biggest success to date, albeit a very short-lived one.

Bricklin reportedly sold his interest in Yugo of America, which was parked under IAI, for USD 20 million.

It was around this time that he approached Proton. He did it by leveraging on his contact with Lawrence Eagleburger, the former US ambassador to Yugoslavia who later served as board member of Yugo of America.

Eagleburger was also the President of Kissinger Associates, which served as a match maker in the world of politics and business. At the centre of Kissinger Associates was Henry Kissinger, the former US Secretary of State. Prior to joining the US government, Kissinger was an academician at Harvard University, and had once taught Dr. Mahathir at the university’s International Seminar in 1967.

Kissinger Associates demanded USD 200,000 in consulting fee and USD 10 for every Proton that Bricklin would eventually sell. Bricklin paid the sum and work began in 1986.

At that time, a bad recession was hitting Malaysia and the car market had shrunk by half. Proton was in trouble, losing money on every car sold. The government desperately needed to export the Proton if the factory is to keep running.

Yugo of America/Global Motor's management, from left: Tony Ciminera, Malcolm Bricklin, Bill Prior 

Tony Ciminera, a former motoring journalist at Road and Track magazine before becoming Bricklin’s No.2 at Global Motors retold his experience meeting of Tun Dr. Mahathir in the book ‘The Yugo – The rise and fall of the worst car in history’ by Jason Vuic.

“They took us to [see Mahathir] in a police car with flags flying on the fenders and all that. He hosted us in this big enormous room. A special protocol officer came in and gave us dos and don’ts. Then [Mahathir himself] came in. Bill Prior (Bricklin’s PR man) did a presentation and the prime minister was very impressed. Sitting there in the room were just executives from the factory itself. And the prime minister just turned to them and said, ‘Sounds great. Let’s do it.’ Just like that. We were stunned. The factory guys were a little miffed, because it was being rammed down their throats. I don’t think they minded the car being exported to the US, but they wanted to explore it more and have more discussion. But Mahathir just said ‘You will do it.’”

Mahathir was sold by Bricklin’s promise to sell 250,000 Protons in the US by 1993, which would make it the 7th most popular car in the US. Bricklin also pledged USD 10 million to convert the Saga to left-hand drive and homologate it to meet US regulations in 15 months.

Left-hand drive Proton Saga prototypes. It's claimed that these were meant for homologation for the US market but we have our doubts - it's missing mandatory for US-market 5 mph bumpers. Credit: Jabatan Penerangan, and Proton Saga, Iswara, LMST Enthusiast FB

Any experienced automotive industry personnel would immediately notice that the timelines and volumes promised by Bricklin were not realistic, especially considering the company’s background.

For whatever reasons, perhaps due to the Kissinger factor, Dr. Mahathir agreed to it. Obviously Mahathir wasn’t aware of Bricklin’s history of the SV-1, Subaru, or even the Handyman stores fiasco.

Shortly after the approval by Mahathir, Bricklin founded Proton America Inc. (PAI) and on 3-December 1986, an agreement was signed between Proton and Proton America Inc., which was parked under a newly created subsidiary of IAI, Global Motors.

But what torpedoed the Proton Saga USA-export deal was not Bricklin’s incompetence, but Proton’s technical partner Mitsubishi.

The deal was a no-go right from the beginning. Ultimately, Proton depended on Mitsubishi Motors to supply the engines and transmission.

Mitsubishi already had a 50:50 joint venture with Chrysler (Diamond-Star Motors) to produce the Lancer in the US, selling it as the Dodge/Plymouth Colt. Allowing a third Lancer-based model into the US would certainly create problems for the joint venture.

Kenji Iwabuchi, standing next to Dr. Mahathir

Meanwhile, Proton’s financial standings continued to deteriorate and by August 1988, Dr. Mahathir lost patience and finally agreed to replace the Malaysian management of Proton led by Dato’ Wan Nik Ismail with Japanese executives from Mitsubishi Motors, led by Managing Director Kenji Iwabuchi, and later Mitsuo Hattori.

The then Finance Minister Daim Zainuddin reportedly expressed his disappointment with the local managers, saying “If that happens to a Japanese, he commits hara-kiri.”

One of the first thing Iwabuchi did at Proton was to cancel the deal with Bricklin, who then tried to file a suit for breach of contract following recommendations made by lawyers connected to, once again, Kissinger Associates’ Lawrence Eagleburger.

They proved to be rather lousy lawyers, because the contract was made between PAI and Proton, not Mitsubishi, who had no obligation to provide the engine and transmission. PAI had no case against Mitsubishi.

In fact, Proton had every right to counter-sue PAI for non-delivery of services provided – the completion of left-hand drive prototype and homologation – but for whatever reasons, Proton/Mahathir left the matter as it is, closed that embarrassing chapter of Proton, and moved on.

This parliamentary hansard dated 15-March 1989 records the question by Bagan's DAP MP Teoh Teik Huat, which was answered by the then Minister at PM's Deparment Kasitah Gaddam

But even if Mitsubishi agreed to supply the engines and transmission, it wouldn’t make any difference because Bricklin would still not be able to deliver on getting the homologation done.

The collateral damage was Wall Street investment firm Mabon, Nugent & Company, which had to be closed down once the Proton deal went south.

The investment firm, which wasn’t very big by Wall Street standards to begin with, bet everything it had on the deal, with the goal of acquiring Global Motors, which had a lofty ambition of becoming an umbrella brand for cheap cars of America – India’s Mahindra, Indonesia’s Lincah Gama (rebadged Isuzu Trooper), Romania’s Oltcit (rebadged Citroens). Their idea was to chase the long tail of cheap cars chart.

“We all got sucked in. But Mabon, Nugent was stupid. I mean really stupid. They bet the ranch. A company that’d been around since the 1890s bet its capital on this thing. On the promise of a car coming to America based only on what Mahathir said to Kissinger. He said, ‘Yeah, I’ll give it to you.’ And Bricklin and Mabon, Nugent and everybody built a castle out of this thing,” said someone closed to the deal to the book’s author Jason Vuic.

I guess back in the roaring ‘80s, when credit was cheap and everyone thought they could make money on the stock market, few stopped to ask the most basic question, which is what if Mitsubishi, who then owned 30 percent of Proton, disagreed.

Malcolm Bricklin in 2017

As for Bricklin, he was last heard peddling his Bricklin EV pitch, and working on something related to art galleries.