- Feb 6, 2007
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The ongoing talks between Volkswagen and Proton have finally come to an end with the German party calling it quits today. This is the second time in two years that talks over cooperation have ended without a deal but VW claims it still plans to set-up a Southeast Asian production base.
The Volkswagen group and the Malaysian government have decided not to further pursue for now joint discussions about a cooperation or an equity stake in the Malaysian carmaker Proton,” according to VW’s official statement.
VW will now independently examine other possibilities to enter the Southeast Asian market, while Proton will no longer seek a foreign partner, reports Automotive News.
The Malaysian government was previously in talks with PSA Peugeot Citroen and GM but no progress was made with either firms.
VW, Proton End Talks, Leaving Malaysia Company Alone
Nov. 20 (Bloomberg) -- Malaysia's government ended talks for an alliance between state-owned carmaker Proton Holdings Bhd. and Volkswagen AG, Europe's biggest automaker, fueling concern about the unprofitable Asian company's future.
Khazanah Nasional Bhd., Malaysia's state-owned investment unit and the owner of 43 percent of Proton, also ended talks with General Motors Corp., the agency said in a statement. Shah Alam, Malaysia-based Proton will be given more time to reverse the losses, it said.
Proton, which posted its first annual loss in at least 17 years last year, had been looking for a partner to help roll out new models and revive sales. Volkswagen said today it will look for other production opportunities in Southeast Asia, where rising incomes are lifting vehicle sales.
"Proton won't survive on its own,'' said Scott Lim, who helps manage $400 million at CMS Dresdner Asset Management in Kuala Lumpur. "It will collapse without a partner, it's a question of when. I don't think they have much time.'' Lim said he sold his Proton shares more than a year ago.
Proton shares have slumped 25 percent this year compared with a 25 percent gain by the benchmark index. The stock today lost 0.4 percent to 4.94 ringgit. The end of the talks was announced after the market closed in Kuala Lumpur.
Khazanah, Malaysia's state investment agency, said signs of improving domestic sales and exports at Proton prompted the government to end talks for an alliance.
More Time
The government "has taken note of the recent positive developments,'' Khazanah said in its statement. "Proton's management should be allowed to continue with its plans to further strengthen the company.''
Proton, which lost 589 million ringgit ($175 million) last year, aims to sell cars in India and to double exports this year and next, it said in September. The carmaker in July signed an agreement with Jinhua Youngman Automobile Manufacturing Co. to start selling cars in China.
The company's Persona sedan, rolled out in August, won 22,000 bookings by the end of October, the Malaysian state news service reported today. A strategic alliance can be considered later "if necessary,'' Khazanah said.
The Persona, Proton's first new car in more than a year, may help the automaker return to profit as early as 2009, analysts at Hwang-DBS Vickers Research Sdn. said in August. Proton plans to sell 4,000 of the vehicles a month.
Still Interested
General Motors, the world's largest automaker, is still interested in Proton, Rob Leggat, a spokesman for the Detroit- based carmaker, said in an e-mailed response to questions.
Proton and Volkswagen jointly ended the talks, the Wolfsburg, Germany-based company said in its statement. Initial negotiations between the two companies collapsed in January last year after the parties failed to agree on terms, including control of the maker of Waja and Wira sedans.
The German automaker will expand its sales and service network in Southeast Asia, in particular within Malaysia, it said in its statement.
Faridah Idris, a spokeswoman for Proton, was unable to comment immediately.
Proton was set up in 1983 by then-Prime Minister Mahathir Mohamad to promote Malaysian manufacturing. Protons, favored by taxi drivers across Malaysia, are among the cheapest cars in the country. The Saga saloon is still on sale more than two decades after the first model was produced.
The search for a partner for Proton followed the end of an alliance with Mitsubishi Motors Corp. in 2004, and the loss of half Proton's market share to competitors including Toyota Motor Corp.
Source:
Motor Authority » Volkswagen and Proton talks fail
Bloomberg.com: Asia
