Volkswagen Seeks Management Control of Proton

By: Anthony Fontanelle

Prime Minister Abdullah Ahmad Badawi said last Tuesday that the fourth largest automaker Volkswagen AG is seeking management control over Malaysia's state-owned Proton as it negotiates an alliance. So far, the Government has not decided on whether to allow the German automaker to take management control of the national carmaker.

Asked if Volkswagen was eyeing management control of the ailing carmaker, Abdullah said: "They have been discussing about it but we have not yet decided on that." Abdullah, who is also finance minister, added Malaysia was keen to wrap up the protracted negotiations as quickly as possible.

"'We want to have this decision as soon as possible but they have to take time. I cannot force them to hurry up," Abdullah told reporters after chairing the Iskandar Regional Development Authority board and advisory council meeting at his office.

A finance ministry official told Agence France-Presse Tuesday that Malaysia was expected to sign a deal with the German company in November. "Malaysia is trying to settle it by November. This is what they intend to do," the source said on condition of anonymity.

It was earlier reported that Volkswagen was close to forming a pact with Proton with at least an initial 20 percent stake. 'Volkswagen is also seeking management control and will require the government to underwrite any losses at Proton for at least three years,' the Edge business weekly newspaper said.

Abdullah said that he would meet with Volkswagen boss Martin Winterkorn when there was a breakthrough in the talks. "I am waiting... only when some decision has been made. They have many meetings but we have not finalized yet our agreements of any particular issues," he said.

Talks between the German automaker and Proton began in October 2004, as Malaysia tried to salvage the homegrown carmaker which is floundering in a newly competitive environment, thanks to a lack of new models and a reputation for poor quality, reported Forbes.

Abdullah said recently that Volkswagen was studying Proton for a possible strategic pact that would help save the national carmaker. For the Malaysian carmaker, a deal is expected to boost efforts to reclaim the top spot in Malaysia's domestic car market and help it get a foothold in the lucrative European market.

Proton needs foreign technical expertise to halt a sharp decline in market share and halt a stream of losses, including a 46.75 million ringgit loss for the first quarter to June announced recently. The quality of and the likes are expected to bolster Proton auto accessories.

The German auto giant intends to fortify its presence the Southeast Asian region. This is why it is seeking management control of Proton. The partnership will boost its potentials in the territory.

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