No Proton, no car industry?

NOV 8 — Tun Dr Mahathir Mohamad, the man behind Proton, infers that without the national car company, there would be no car industry in Malaysia. Can that really be true? And can it really be so simple? No Proton equals no automotive industry? After all, it wasn’t as if Malaysians only walked before the Saga came along.

On the flipside, we also have people who continue to spend time trying to determine if, had there never been a Proton, we would not be better off than where we are right now. The answer from them, as I’m sure you can imagine, is often a resounding yes.

The problem is, however, people generally suck at determining causality. Whether you choose to view it as an inherent human flaw or endearing characteristic, people are prone to seeing what they choose to see. Sometimes even to the point of doing so in the face of contrary evidence.

Often, people confuse an accompanying sign or condition as the cause of an occurrence. Take for example the classic lesson in determining causality: Do storks bring babies or do babies bring storks?

Following the end of the second World War, population in Western European cities rose steadily. As it happens, this was accompanied by a similar increase in the population of storks in these areas. To the casual observer, it would appear that there is a strong correlation between the rate of growth for humans and a similar rate in storks.

Having observed that link, you’re tempted to ask whether there are more babies because there are more storks or more storks because there are more babies. The answer, of course, is neither.

What happened was post-war Europe saw a migration trend towards built-up areas, which resulted in higher urban population densities and increased birth-rates. So although there was an apparent connection between the numbers of babies and storks being born, the cause of both was determined to be the increased rate of urbanisation.

Storks, therefore, didn’t bring more babies. People did. The same went for storks. With a growing populace came the need for additional housing, which subsequently provided more nesting area for the storks. Which meant babies didn’t bring more storks. Again, people did.

Once someone points out the actual causality, the earlier assumption that there is causality in the correlation between the number of storks and the number of babies becomes preposterous. Yet people had no qualms spending time trying to determine causality where there was none.

Having revisited correlation and causality, is Dr Mahathir still right? Would Malaysia really have no automotive industry if the national car policy was not implemented back in the 1980s? But before you even go there, it’s important to define what constitutes an automotive industry.

Dr Mahathir likely (I’m guessing) considers an automotive industry to mean automotive manufacturing — cars and parts. The inference then is that sans Proton it would not have been possible for the ancillary industry to take root and flourish. The probable logic being with no national car company to supply parts to, nobody would bother to set up companies to supply parts.

Of course, you could also choose to define an automotive industry as everything that concerns vehicles minus the manufacturing. There’s still a lot of money to be spent — and made — long after buyers sign on the dotted line.

If you take the first definition, then Thailand serves as the counterpoint of just how possible it is to have not only an automotive industry, but a thriving one at that, without the hassle of setting up your own national car company.

Detroit of the East may be a little flattering for Rayong, but there is no hiding from the reality that Thailand has far surpassed Malaysia as the preferred destination for foreign car manufacturers planning to set up shop in the region.

At nearly 1.5 million vehicles, Thailand’s vehicle assembly plants churn out three times as many vehicles as their Malaysian counterparts do, all the while supplied by parts suppliers who never had a national car company to supply to. So no Proton means no automotive industry, still?

If you prefer the definition that omits the manufacturing side of things, then Singapore provides a prime example of a thriving automotive industry that has little involvement with factories and assembly lines.

Before you dismiss the little red dot as an automotive industry, know that Singapore car sales practically match our own, with over half a million cars sold a year in the tiny island-state. Half a million cars that need spare parts, accessories, car care, prestige parts, and more. There must be money in all that.

Not only does Singapore not have a national car company, it doesn’t even have all that many roads to drive on. Not even remotely as many kilometres upon kilometres of shiny highways as we do. So no Proton, no automotive industry still?

This is not to say Dr Mahathir’s inference is categorically wrong; it could really have been that Malaysia was so hamstrung that without the catalyst of Proton’s inception, we would have continued grinding away in neutral while our neighbours passed us by. Who knows for certain if that truly was not the case? Now, at least we’re in first gear, even if our neighbours are still passing us by.

My intention is to point out that without Proton or a national car company or protectionism, it would have still been possible for Malaysia to have a successful auto industry. Our neighbours to the north and to the south show us that this is so. Just because we have Proton doesn’t render all other possible outcomes null and void.

The only thing that is truly certain if we did not have Proton, is that there would be no Proton. Nothing more, nothing less.

Anything else and you’re just making things up.

The Diary: Martha Kearney

A proton bomb and an artillery shell are waiting to explode at the bottom of my garden. They are joining the Graveshaker and Howling She Devil in my husband’s box of tricks for our bonfire party this Saturday evening. Do you think, by any chance, that firework manufacturers have the male customer in mind when they choose the names for their pyrotechnics? Personally, I used to like the pretty little Snowdrop, with its white sparks – but that certainly doesn’t light my husband’s fuse. To accompany the display, he’s bought a giant polystyrene skull of Easter Island proportions (half-price after Halloween) to perch on top of his shrine to fire.

We broadcasters like to comfort ourselves after making mistakes on air with the thought: “Oh, the listeners or viewers love it when we make a mess of things.” I hope they do after a recent edition of The World at One. I read an introduction to an interview with army chief of staff General Sir Mike Jackson, who turned out not to be there. The producer had tried to tell me in my headphones just before we went on air. She thought the reason I hadn’t flinched was that I was super-cool. If only. In fact what happened was that she had pressed the wrong “talkback” button as the Sellotape with my name on it had slipped. Do you think Nasa has these problems in their control room?

Mind you, incidents like that were pretty run-of-the-mill at the first radio station I ever worked for – LBC in Gough Square just behind Fleet Street in London. I remember one news bulletin being interrupted by a woman entering the studio with a vacuum cleaner. This week I met up with some of the other women who worked there for a meal and to exchange some reminiscences. Many are far too scurrilous to repeat but I do love the story about the presenter (once a nationally known DJ) who used to fall asleep regularly on air during his live phone-in. The producer used to have to dash into the studio to wake him up. At least that’s never happened to me on The World at One.

Several of my male friends have taken to cycling in a symptom of the kind of midlife crisis that used to be reserved for fast cars and trophy wives. One has eight bikes, including a gold one that is “too good to ride”. All he does is stroke it and lift it up by one finger to show how light it is. Then there’s the Lycra. Another friend is a GP and a watchword for his conservative attire. Yet at the weekends he proudly squeezes himself into black-and-yellow cycling gear and terrorises the Suffolk countryside by turning into his alter-ego The Wasp.

I have a bike myself and, after I’ve checked several weather forecasts to be sure there won’t be a drop of rain, do enjoy going out for the odd ride, needless to say, not dressed in Lycra. My main problem in cycling, though, hasn’t been the dress code but the aches caused in my backside after any length of time in the saddle. The aforementioned male friends all claim that those pencil-thin leather saddles are really comfortable “once you get used to them”. In the same way, I suppose, that prisoners of the Inquisition got used to the Iron Maiden.

But I made a wonderful discovery this year on a short break to Le Touquet, on the northern coast of France. While we were there, we hired bikes with the most comfortable saddles I have ever experienced. These couldn’t be further from the Masoch model beloved of my friends. In fact I would describe them as the La-Z- Boy of saddles, fully padded and perfectly suited to my Miss Marple style of pedalling, which is at the other end of the spectrum to The Wasp.

I once spotted the wife of a Conservative MP dressed in full ball gown cycling out of the House of Commons. “Just off to Buckingham Palace!” she cried. I certainly wouldn’t risk cycling either to a posh event or wobbling home afterwards. So I went by cab to the National Liberal Club, a splendid late 19th-century neo-Gothic building just off Whitehall, to celebrate the 30th anniversary of the London Review of Books.

I had that awful moment when I arrived and didn’t recognise anyone I knew, so had to pretend to be very interested in the panelling of the library. Eventually, some old mates turned up and I ended up meeting an eclectic group of people, including the poets Hugo Williams and David Harsent and a Serbian academic who is a cousin of Radovan Karadzic.

There was also one of those scenes that form a familiar motif at literary parties. I witnessed a Booker judge apologising to an author for not including him on the shortlist. I am judging the Guardian First Book prize at the moment so will have that particular guilt trip to face soon.

There was one very dramatic moment at the LRB party. I was utterly surprised when writer and political campaigner Tariq Ali leapt athletically on to a table and thrust his arm into the air. Luckily this wasn’t the start of a long political denunciation of our Liberal surroundings but a vote of thanks to the LRB’s editors. I remarked on that to one of the Review’s staff on my way out. “Oh he always does that at our dos,” came the reply. “He’s a serial table climber.” No harm in keeping your hand in, I suppose, in case the barricades are piled up again.

That same evening, I also went to a reception at Lambeth Palace. No one leapt on the table there – possibly deterred by the stern glances of various archbishops of Canterbury through the ages, whose portraits line the walls. I had a brief chat with the current holder of the office, who told me that he’d hosted parties every night that week for several charities. This reception was for a charity called Five Talents, which provides microfinance for people who want to start small businesses in the developing world.

I will always remember interviewing a woman from Nigeria who had been given a small amount of money to buy some chickens who ended up employing several of her neighbours in a flourishing business. I am full of admiration for anyone from whatever background who can make a success of a small business. I used to harbour a secret fantasy about setting up a chutney business. Not after this week. I never thought I would miss a marrow. Normally we have far too many of the things as delicate little courgettes turn into boring tasteless marrows as soon as you turn your back. But at least they do bulk up the chutney. This year we grew a new type of yellow squash that was so inedible that I couldn’t even risk it in heavily spiced chutney. My recipe does get more and more ridiculously lavish every year, so something that is intended to use up spare apples has become a concoction involving balsamic vinegar and posh dates. Delicious except that lacking a marrow, I got the proportions wrong and it’s far too liquid. I don’t think the market is ready for a pouring chutney.

Martha Kearney is the presenter of ‘The World at One’ on BBC Radio 4 and of BBC 2’s ‘Newsnight Review’

Copyright The Financial Times Limited 2009. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web.

Martha Kearney

A proton bomb and an artillery shell are waiting to explode at the bottom of my garden. They are joining the Graveshaker and Howling She Devil in my husband’s box of tricks for our bonfire party this Saturday evening. Do you think, by any chance, that firework manufacturers have the male customer in mind when they choose the names for their pyrotechnics? Personally, I used to like the pretty little Snowdrop, with its white sparks – but that certainly doesn’t light my husband’s fuse. To accompany the display, he’s bought a giant polystyrene skull of Easter Island proportions (half-price after Halloween) to perch on top of his shrine to fire.

We broadcasters like to comfort ourselves after making mistakes on air with the thought: “Oh, the listeners or viewers love it when we make a mess of things.” I hope they do after a recent edition of The World at One. I read an introduction to an interview with army chief of staff General Sir Mike Jackson, who turned out not to be there. The producer had tried to tell me in my headphones just before we went on air. She thought the reason I hadn’t flinched was that I was super-cool. If only. In fact what happened was that she had pressed the wrong “talkback” button as the Sellotape with my name on it had slipped. Do you think Nasa has these problems in their control room?

Mind you, incidents like that were pretty run-of-the-mill at the first radio station I ever worked for – LBC in Gough Square just behind Fleet Street in London. I remember one news bulletin being interrupted by a woman entering the studio with a vacuum cleaner. This week I met up with some of the other women who worked there for a meal and to exchange some reminiscences. Many are far too scurrilous to repeat but I do love the story about the presenter (once a nationally known DJ) who used to fall asleep regularly on air during his live phone-in. The producer used to have to dash into the studio to wake him up. At least that’s never happened to me on The World at One.

Several of my male friends have taken to cycling in a symptom of the kind of midlife crisis that used to be reserved for fast cars and trophy wives. One has eight bikes, including a gold one that is “too good to ride”. All he does is stroke it and lift it up by one finger to show how light it is. Then there’s the Lycra. Another friend is a GP and a watchword for his conservative attire. Yet at the weekends he proudly squeezes himself into black-and-yellow cycling gear and terrorises the Suffolk countryside by turning into his alter-ego The Wasp.

I have a bike myself and, after I’ve checked several weather forecasts to be sure there won’t be a drop of rain, do enjoy going out for the odd ride, needless to say, not dressed in Lycra. My main problem in cycling, though, hasn’t been the dress code but the aches caused in my backside after any length of time in the saddle. The aforementioned male friends all claim that those pencil-thin leather saddles are really comfortable “once you get used to them”. In the same way, I suppose, that prisoners of the Inquisition got used to the Iron Maiden.

But I made a wonderful discovery this year on a short break to Le Touquet, on the northern coast of France. While we were there, we hired bikes with the most comfortable saddles I have ever experienced. These couldn’t be further from the Masoch model beloved of my friends. In fact I would describe them as the La-Z- Boy of saddles, fully padded and perfectly suited to my Miss Marple style of pedalling, which is at the other end of the spectrum to The Wasp.

I once spotted the wife of a Conservative MP dressed in full ball gown cycling out of the House of Commons. “Just off to Buckingham Palace!” she cried. I certainly wouldn’t risk cycling either to a posh event or wobbling home afterwards. So I went by cab to the National Liberal Club, a splendid late 19th-century neo-Gothic building just off Whitehall, to celebrate the 30th anniversary of the London Review of Books.

I had that awful moment when I arrived and didn’t recognise anyone I knew, so had to pretend to be very interested in the panelling of the library. Eventually, some old mates turned up and I ended up meeting an eclectic group of people, including the poets Hugo Williams and David Harsent and a Serbian academic who is a cousin of Radovan Karadzic.

There was also one of those scenes that form a familiar motif at literary parties. I witnessed a Booker judge apologising to an author for not including him on the shortlist. I am judging the Guardian First Book prize at the moment so will have that particular guilt trip to face soon.

There was one very dramatic moment at the LRB party. I was utterly surprised when writer and political campaigner Tariq Ali leapt athletically on to a table and thrust his arm into the air. Luckily this wasn’t the start of a long political denunciation of our Liberal surroundings but a vote of thanks to the LRB’s editors. I remarked on that to one of the Review’s staff on my way out. “Oh he always does that at our dos,” came the reply. “He’s a serial table climber.” No harm in keeping your hand in, I suppose, in case the barricades are piled up again.

That same evening, I also went to a reception at Lambeth Palace. No one leapt on the table there – possibly deterred by the stern glances of various archbishops of Canterbury through the ages, whose portraits line the walls. I had a brief chat with the current holder of the office, who told me that he’d hosted parties every night that week for several charities. This reception was for a charity called Five Talents, which provides microfinance for people who want to start small businesses in the developing world.

I will always remember interviewing a woman from Nigeria who had been given a small amount of money to buy some chickens who ended up employing several of her neighbours in a flourishing business. I am full of admiration for anyone from whatever background who can make a success of a small business. I used to harbour a secret fantasy about setting up a chutney business. Not after this week. I never thought I would miss a marrow. Normally we have far too many of the things as delicate little courgettes turn into boring tasteless marrows as soon as you turn your back. But at least they do bulk up the chutney. This year we grew a new type of yellow squash that was so inedible that I couldn’t even risk it in heavily spiced chutney. My recipe does get more and more ridiculously lavish every year, so something that is intended to use up spare apples has become a concoction involving balsamic vinegar and posh dates. Delicious except that lacking a marrow, I got the proportions wrong and it’s far too liquid. I don’t think the market is ready for a pouring chutney.

Martha Kearney is the presenter of ‘The World at One’ on BBC Radio 4 and of BBC 2’s ‘Newsnight Review’

Copyright The Financial Times Limited 2009. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web.

Formula One Insider - Toyota Drops Out... Who's Next?

Formula One Edition

November 6, 2009

TOYOTA OUT. RENAULT NEXT?

Toyota announced this week that it will be pulling out of Formula One racing, effective immediately. While that is not a death blow, it certainly is distressing because you never really want to see manufacturers pulling out of the game. The decision was based on the fact that the F1 team was costing them too much considering that sales have not been what the company expected. It's obviously a reflection of the condition of the auto industry worldwide (Toyota is expecting a $3.8 billion loss for the year, but posted a $242 million profit for the quarter).

Some have actually touted this as being a break for the smaller teams, because they would not have as many manufacturers themselves to contend with. BMW and Honda have pulled out within the last year, but there are others obviously still on the grid. Ferrari is out there, as is Mercedes, which is buying into the defending champion Brawn GP team. Lotus is coming in next season as one of the new entrants, and Lotus Cars' parent company, Proton, is one of the partners.

Renault is the team that is in something of a limbo right now. On the heels of a scandal of major proportions involving former team principal Flavio Briatore and the pre-arranged crash of Nelson Piquet Jr. at Singapore last year, Renault, who employed Fernando Alonso (+225 to win next year's driver's title at BetUS), who has already skipped over to Ferrari, is pondering whether it wants to continue in F1 in 2010, and will come up with a decision by the end of the year. If they continue, they will have to come up with a ay to replace major sponsor IMG, which has pulled out.

The Toyota pullout was surely good news for one team in particular - the Sauber team, which lost the BMW support but picked up financial backing from Qadbak Holdings, was poised to be an "alternate" team, to be inserted in case somebody else pulled out, barring a special ruling that would have allowed 14 teams on the grid. This opens up possibilities for them.

Not so fast though, says the FIA, which will offer a legal challenge to this decision, based on the fact that it came after Toyota had already committed to staying in F1 through the 2012 season.

At the very least, they're going to use it as leverage.

The FIA is using the departure of Toyota as a way to facilitate more conversation on the subject of budget caps. This is not unlike baseball, in that the teams in the smaller markets probably wouldn't mind having a salary cap, but teams like the New York Yankees, Los Angeles Dodgers and Boston Red Sox wouldn't hear of it. Well, think of Ferrari as the Yankees, Red Bull as the Dodgers and McLaren as the Red Sox (okay, Brawn GP is in there somewhere). The "haves" don't want to even the playing field with the "have-nots."

This battle was fought earlier in the season, when the FOTA (Formula One Teams Association) threatened to pull out en masse and start their own circuit. Ferrari blames FIA for the Toyota situation, saying that the organization has "waged war" against major car manufacturers.

At the same time, Ferrari would like to get the rules changed to allow each team to have a third car, because they are contemplating a return of Michael Schumacher in that car for 2010 (as much has been confirmed by Ferrari president Luca di Montezemolo).

It's the silly season, and drivers are now looking for rides. Kamui Kobayashi, who did well in a couple of races for Toyota as he subbed for the injured Timo Glock (100/1 for next year's title at BetUS), is hoping to wind up with the new Lotus team. Kobayashi finished fifth in the season finale at Abu Dhabi, and is almost certain to find a ride somewhere based on his confident efforts. The principals of the Toyota team say they'll help him in any way possible to find a seat.

The Williams team, which used Nico Rosberg (+1200 for next year's title at BetUS) and Kazuki Nakajima this past season as drivers, will have Rubens Barrichello and Nico Hulkenberg in the cockpit in 2010. Barrichello finished third in the world championships with the Brawn GP team this year, while Hulkenberg is the champion of the GP2 series and has been a Williams test driver.

Bruno Senna, nephew of legendary F1 driver Ayrton Senna, will enter Formula One next year as a driver with the new Campos Meta 1 team. Senna would probably have been a member of the Honda team, had it not pulled out before the start of last season.

By the way, here is the initial list of future odds to win the Driver's Championship next season, as posted at BetUS Sportsbook:

Without protection we would not have a car industry — Mahathir Mohamad

written by The Pencil, November 05, 2009 wow, this is just the way of saying that "NAP is not my fault please refer to the correct people"

Yes its true that a homegrown auto industry needs some sort of protection against bigger brands in the start, but that does not mean that they need to be protected INDEFINITELY. Come on, more then 20 damn years in the industry and proton is still giving us half past six products?

in fact, the protons of yesteryear are better built than the protons of now because no proton now is built with passion, or even a keen eye for detail. Loose parts on the first week of purchase, missing items like a boot plug, and even the fact that the centre that sold the cars can't even have the common courtesy to aligned the wheels and steering wheel properly. Many of my friends who have bought new protons like the satria neo and persona all have their own set of complaints - all within the first month of purchase. What kind of competitiveness is that?? How can you win the hearts of the world when you cant even win the hearts of the local nation?

And to add insult to injury, its not like the protons are anything 'affordable'. 50k for a normal sized sedan. wow, thats some load of cash. How can the lower income bracket people afford our local cars?

A small history lesson:
The VW Beetle was herald the 'people's car' in Germany when it was first launched. It was built tough and long lasting and could be bought easily by anyone. That is a 'people's car' where it serves the nation.

Proton seems to be the opposite: give us crap at expensive prices, so we spend more to maintain the crap buying expensive parts, whittling our already dry pockets due to the initial purchase of the car. Best part is, most of us are stuck with that one purchase for more than 10 years due to hire purchase loans.

Highlights From SIRI's Q3 Conference Call: Revenue Grew to $630 Million Record ...

November 5, 2009 12:29 PM EST

SIRIUS XM Radio Inc. (Nasdaq: SIRI) reports Q3 EPS of breakeven, ex-items, 2 cents better than the consensus of a $0.02 loss. Revenues rose 3% to $630 million, above the consensus of $608.7 million. Shares are currently up 3%.

Highlights From SIRI's Q3 Conference Call:
SIRIUS XM affirmed its year 2009 guidance of over $400 million in pro forma full-year adjusted income from operations.
(CEO) We were also pleased this quarter that we grow subscribers and improved churn. Our subscriber base is large, loyal and satisfied, and is expanding again with a net addition of over 100,000 subscribers in the third quarter.
ARPU continues to grow because of the steps we've taken to improve the economics of this business.
Our revenue grew this quarter to a record Q3 revenue, the best ever in Satellite Radio history of $630 million.
Combining revenue growth with expense reduction allowed us to generate 106 million of adjusted EBITDA in Q3 of this year versus negative 37 million for the same quarter last year, a swing of $143 million.
Similarly, free cash flow for the quarter was $27 million versus negative 98 million, a substantial positive swing of approximately $125 million.
Today, we are conforming guidance for the year at over 400 million of adjusted EBITDA. The two satellite radios combined ended 2007 with an adjusted EBITDA loss of $565 million. Before the merger the two companies lost $565 million. After the merger, the company is going to report over $400 million, $1 billion turnaround in two years.
Simply put, our fixed cost base would not materially change whether we are serving 18.5 million, 20 million or 25 million subscribers or even 50 million subscribers for that matter.
The quarter highlights also include an improvement is self paid churn, which dropped below 2% for the first time this year at 196 for the third quarter it represents significant progress from the 2.2 reported for Q1 this year.
We ended the quarter with approximately $380 million in cash with only 82 million of debt due by the end of this year and no maturities next year.
The great thing about our relationship with the automakers is that they are very effective ways for us to market to potential customers. With penetration currently at 55% and conversion rates at 46.8%, we can be highly confident that new subscribers will be joining us as they are introduced to our service.
In addition, we just recently begun to aggressively pursue the used car market and believe that there is a tremendous opportunity to convert already installed, but dormant satellite radios into paying subscriptions.
Cash operating costs for the first nine months of 2009 were down almost $0.5 billion, or almost 25% from last year. We know how to squeeze cost out of the system, and you should look forward to more of that in the quarters to come.
We assumed a conservative estimate for 2010 of 11 million cars and light trucks. In that scenario, we will finish 2010 with an increase in net ads, our revenues growth mid-to-high single digits, we're forecasting growing adjusted EBITDA over 20%, and we will not only be free cash flow positive, we will increase Sirius XM free cash flow over the 2009 results.
In the first nine months of this year, we have now generated, $347 million of adjusted income from operations, a positive swing of 550 million from the first nine months of 2008.
Cash operating expenses year-to-date were $465 million lower than 2008, even if you isolate the impact of lower growth sales resulting from the automotive industry's slump, cash operating expenses were lower by $375 million in just nine months.
With the slight decline in churns in Q2, and an increase in auto sales, we were able to resume subscriber growth in the third quarter adding approximately 102,000 net subscribers to finish the quarter with 18.5 million.
Both our self-paid and commercial subscriber bases have increased since the end Q2, 35,000 and 67,000 respectively.
Our self-pay base was 15.5 million at the end of Q3 compared to 15.2 million a year prior, our paid promotional base is about 3.1 million at the end of Q3 compared to 3.7 million at the end of Q3 of '08 lower by nearly 700,000 subs due to the dramatic fall of with the North American auto sales.
We are particularly pleased with the uptick in our conversion rate in the third quarter moving up to approximately 47% from the 44 to 45%, we have been seen in the previous summer months.
Total revenue grew approximately 3% or $17 million versus the same period a year ago to 630 million primarily driven by a 3% increase in ARPU plus the collection of additional music recovery fee revenues, which are not included in our ARPU.
We achieve this revenue growth despite 1.7% decline in average subscribers versus the same period last year.
SIRIUS XM continues to deliver positive adjusted EBITDA reaching 106 million this quarter. The big driver was a 19% reduction in cash operating expenses bringing it down to $126 million lower than Q3 last year.
Satellite and Transmission declined 26%, programming 29%, Sales and Marketing 32%, G&A 36% and Engineering 8%. Revenue sharing royalties up 2%, slightly less than our revenue growth rate as we saw improvement from the renegotiated GM contract, which partially offset the effect of higher OEM mix and the higher performance royalties versus year ago.
The build of that XM 5 is largely complete and we expect to launch it on a Proton rocket next summer. Completing the refresh of the SIRIUS constellation will be the launch of SIRIUS 6 in late 2011, which will also go into geostationary orbit. Satellite CapEx excluding capitalized interests to support these programs is expected to be approximately 170 million in 2009; 220 million in 2010 and 125 million in 2011.
(Q&A) Couple of questions on the car market. So, one, I was wondering if you could give any sort of metrics on the kind of performance you're getting out of your programs with used car sales? And any sort of good ways to think about how big an opportunity that can be over time? And then you said there are about 600,000 unpaid trail subs at the end of this quarter. Can you give an indication of what that number looks like at the end of may be second quarter and first quarter also? Thank you very much. (A)On the used cars, we are learning quite a bit and frankly the way we forecast the number is, we've gone back and looked at how many cars have been built with satellite radio inception today. We then use kind of a industry-standard curve for when those cars transition. So for instance after four years, we know almost close to 55% to 60% have moved to the second owner. We then overlay that on what's been built, we look forward what things going to be built and we predict both the industry going forward year by year. I can tell you the industry between now and 2014 gross extensively. Our challenge in 2010 is to get our arms around effectively predicting how bif that market is and how to reach those subscribers. And I think you will hear more us in the quarters to come on that particular on. Dave, do you want come on the pay trails? (A)So on the pay trial, the figures that I have handy are a year ago as supposed to sequential quarters. So, what we should think about it is that a year ago we had little bit less than 400,000 unpaid trials and for the growth it's been a little bit more than 200,000 since a year ago. I think, you can expect that most of that growth came on as the automotive industry began rebounding from the lows that it hit at the end of last year, beginning of this year.
Question on the network architecture situation, how long do you think it will be before Sirius is using some one constellation of satellites to service the entire customer base? And has that timeframe changed since you first kind of started contemplating the original merger? (A)The answer to the second
question is that it hasn't changed. When we contemplate the merger and then when we finally announced that and began explain to people what was going to happen, one of the things that we told them is to not expect a -- really any meaningful satellite efficiencies from getting to one constellation for
really long time. And the way that we explained it is that it takes a long time to make changes in what the automakers put in cars. And so we have -- once you pick, I'd say, you were to decide to pick to go to one system, you -- once you made that choice, it will take a few years to roll it into production, and then a few years for them to actually ramp it up and get it through all the -- alter their plants. So it end up with several years before you begin really a meaningful transition of what's in the field, many of [indiscernible] cars in the field. So we've already got the spending out of the way for second-generation
satellite constellations in basically the next 24 months. And then those assets are good until beyond 2020. So we will face the decision from a spend perspective really and sort of about 7, 8 years time and what we want to do with respect to two versus one constellation. So the timing is still -- still what it was -- the time of the merger and it's still pretty far out. But what it does allow us to do is that there were near term savings so that by making the decision for Sirius to operate with two a geostationary satellites instead of three KEO [ph] satellites, that we basically cut one satellite and save a spare, because XM had already build a spare. So relative to the plans we have pre-merger, it takes about 400 million of CapEx out of the near term.
First one follow up on what was just being talked about. Do you use the same repeater system with the new Sirius to geostationary satellites in additions to the XM geostationary satellite? (A)That's a great question. And here also since the merger our engineers have been hard at work and really done, what I consider to be is very clever engineering. We are fully integrated now, the repeaters networks and in fact, we expect going forward to actually be able to operate repeaters that allow us very efficiently to
broadcast both streams. So, we're still working on the numbers, but we're confident that our repeater expenses are under control, and we'll not -- would not grow the way you would expect them to grow if you went to an all GEO versus HEO constellation.
And so do the elliptical orbiting satellites find the back up to the geostationary orbiting rather than the other way around in fact --? (A)I thank what happens is the lives of these are so difficult to predict, and we're actually at a very great situation, where we have a lot of options as to how ultimately that works, but I'll go back to David's comments, we are going to end up with two geostationary Sirius satellites, two geostationary XM satellite, and a spare that we will launch next summer in the middle which gives us a lot of flexibility. (A)Sure I think the way that you should think about it is that, right now since we turned out in Sirius V in September, we're operating there effectively a two GEO -- two HEO, one GEO operating configuration, we're likely to stay in that configuration until at least 2013, and then sometime between 2013 and 2015, which is roughly when the HEO, the first generation HEO constellation reaches it's end of life, we'll flip over to the two GEO mode supplemented by the expanded trust or refuse.

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NAP policy excludes the everyday man

I refer to the letter New NAP policy terribly unjust.

In isolation, the policy to inspect vehicles over 15 years of age is sensible. But as always, the policy-makers have failed to consider the welfare of its citizens. If you break down these types of policies to its core, basically, a National Transportation Policy is needed.

Beyond all the emotional values of owning a car, these policies should be about how to transport people from point A to point B in the most efficient and safest way possible. In Malaysia, personal transportation via cars and bikes are the norm.

Ask any person, especially those in cities, on what proportion of their monthly income goes towards transportation. I guess that most Malaysians would drive cars. I would also hazard a guess that, in the Asia-Pacific region, Malaysians pay the most for their transportation as a proportion of their income, if you delve into the total cost of getting from A to B.

Economically and environmentally, isn't this a waste? Who is the National Automotive Policy meant to protect? I doubt that it's you and me, the common rakyat. If you read the policy in detail, its meant to protect Proton and the car distributors.

In the long term, protecting both is unfair and unsustainable. There's no logic in protecting a car- maker who can't survive in export markets and car distributors who rely on APs (approve permits) for their income.

The NAP forces the public to continue to rely on personal vehicles for their transportation and narrows down their options.

What about those that can't drive because of their age, income and even capability? I've been hit by an eighty-year-old in an E-Class Mercedes Benz. He told me that his driver didn't want to work overtime and the taxi service, being so unreliable, had refused to send him to his destination.

Or perhaps consider the motorcyclist who has to throw his body in between the deadly mix of cars and buses to get from point A to B because we didn't give him a viable public transportation option. Mind you, with this number of motorcycles on the road, there isn't even a dedicated lane on most of our roads to keep them safe.

Why is it once poorer countries like South Korea now have supremely efficient transportation systems? It's possible to now travel, by subway, from one end of Seoul to the other in less than one hour.

For a city with a population of 23 million-odd people, that's remarkable. Yet, car ownership is not inaccessible like it is in Malaysia. People can drive if they want, from point A to point B but the government has given them the option of taking public transportation.

Our National Automotive Policy? Possibly not for you and me.