Volkswagen No Longer Interested in Proton?

by : Natalie Anderson

According to a report by The Edge, talks between car maker Proton Holding Bhd and Europe's largest automaker, Volkswagen AG-and maker of renowned --- that have began last year have not been pushing through according to what the Malaysian government is hoping for.

The weekly newspaper has reported that officials from Proton and Volkswagen had met several times but no concrete agreement has been developed. The newspaper also added that the talks have not been going well and that it seems like the German automaker has somewhat "cooled off" and appeared less eager lately.

The newspaper has also quoted a source familiar with the situation as saying, "This delay could reveal some doubts." The Malaysian government is also under pressure to announce details of partnership for loss-making Proton, which has lost its status as the country's biggest-selling car maker rival Perodua. The government believes that news of Proton's partnership with Volkswagen can help it to recover.

Last week, Proton announced its third consecutive quarter of losses which it blames on increased competition and sluggish sales. The company obtained a net loss of 281.45 mln rgt for the third quarter ended December compared to the net profit it has made a year earlier amounting to 86.51 mln rgt.

The second Minister of Finance Nor Mohamad Yakcop said that the government would release an announcement on the Proton's strategic partner this month. Nobody knows whether it would still be Volkswagen or some other company. But according to The Edge newspaper, "If this schedule is adhered to strictly, sources say General Motors, the world's largest automaker, could well become the partner of choice for Proton."

The main objective of having Proton partnered with a foreign automaker is to prevent another foreseen decline in its market share as competition heats up. It should be noted that when news of a possible partnership with Volkswagen have leaked out the shares of Proton has increased but after the news of the partnership was not confirmed the shares of Proton plunged.

Aside from Volkswagen, Proton has also been in talks with GM and PSA Peugeot Citroen of France plus some three Malaysian automotive firms that have expressed the interest in purchasing stakes in the company. It should be noted that the Malaysian government owns 59 percent of Proton including a stake of 43% held by Khazanah Nasional, the investment arm of the government.