Malaysia's Proton, Volkswagen close to tie-up

[Reng]

Malaysia's Proton, Volkswagen close to tie-up: report

Posted: 07 June 2007 1626 hrs

 

 

 

KUALA LUMPUR: Malaysia's ailing national carmaker Proton and Germany's Volkswagen AG are close to sealing a tie-up that will likely see the German auto firm take a 51 per cent stake in its key assets, a report said Thursday.

 

Citing unnamed sources, The Edge Financial Daily said a new company would be created which will see Volkswagen, Europe's biggest carmaker, controlling key operations with the 51 per cent stake.

 

Proton Holdings will hold the remaining 49 per cent in the new company, which would encompass key assets including British subsidiary Lotus, as well as manufacturing, research and development, and engineering activities, the report said.

 

A 42.7 per cent stake in Proton Holdings currently held by the government's investment arm, Khazanah Nasional, may also be taken over by state-linked conglomerate Sime Darby, The Edge reported.

 

The newspaper said details were expected to be finalised at a meeting underway in New York between representatives from Volkswagen, Khazanah, Sime Darby and the prime minister's office.

 

With Volkswagen's expertise and platforms, the new company is expected to launch new Proton models under the Malaysian carmaker's brand name while most of the existing ones will be phased out, it said.

 

Proton officials declined to comment on the report while Khazanah executives were not immediately available.

 

Proton's share price was sharply higher Thursday on the news. At the morning close, Proton was up 0.95 ringgit (0.28 cents) or 16.24 per cent at 6.80 ringgit.

 

Malaysia's government has been under intense pressure to announce details of a partnership for Proton in a bid to provide it with expertise to arrest a sharp decline in market share.

 

The company last year lost its status as Malaysia's biggest-selling automaker to rival Perodua, another homegrown manufacturer.

 

Prime Minister Abdullah Ahmad Badawi said on May 31 that talks with Volkswagen had failed but the next day a senior government official said negotiations were back on after Volkswagen requested a final round of talks.

 

A senior government official said last month that talks were also continuing with US automaker General Motors Corp.

 

Analysts said a deal with VW would bring no immediate relief for Proton.

 

In a note to clients, Hwang-DBS Vickers Research said a partnership with Volkswagen remains the preferred scenario, but "a gestation period of 18 to 24 months may be necessary in order for operational turnaround to take effect."

 

TA Research said a tie-up with Volkswagen is "a step forward for Proton but it will still have to endure some pain in the short term due to huge inventories and declining sales."

 

Malaysian ministers have acknowledged that Proton needs a foreign manufacturing partner which would bring the necessary expertise to help turn around the company's fortunes.

 

At the same time they have expressed reservations about ceding control of a key national asset, although The Edge Financial Daily said such views were changing in the face of Proton's loss-making performance.

 

Proton last week reported larger than expected net losses of 591.36 million ringgit (US$174 million) for the year to March 2007.

 

The carmaker blamed weak sales and higher production costs for a reversal from the previous year's profit of 46.69 million ringgit.

 

The government has so far missed two self-imposed deadlines to announce a partner for Proton.

 

Previous talks with PSA Peugeot Citroen of France and Mitsubishi of Japan were unsuccessful.

 

Proton's market share has fallen sharply in recent years due to the whittling away of duties that have made imports more affordable, and a persistent reputation for poor quality and unimaginative models.

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It seems like Proton had no choice but to give up majority share holder.

Hope change name to Volksproton.

[Seanboi]

Sounds good. Able to see better built cars with nicer exterior/interior. And maybe the VW FSI/TSI engine.

 

Imagine if one bought the shares @ RM0.95, den now shoot to RM6.80

[Verve]

wonder what will happen to all the half past six quality cars that proton churned out recently like the gen 2 waja and savvy - will vw send these to scrap and come out with skoda clones ??

 

and what about wira -

[Reng]

All lay-long sell,buy one get one free.

[Verve]

wah lidat i queue up liao

[Ommph]

Erm..sorry ah but like dat is good new or bad new for the image of VW, since Proton's image..........??

[Miles]

news report just confirmed... deal confirmed... VW took 51% stake and full control of Proton.

 

it means- they have the option of scrapping the Proton marque and fully exploiting Lotus knowledge base. Whether or not VW is interested in Proton's home market is another question. They may just use Proton's Tanjong Malim plant to assemble VW cars and sell locally while totally shelf Proton's production.

 

Or we may see new Proton that's as well built as a Skoda and comes with the new MPI/FSI/TSI engine and DSG gearbox selling at Toyota price.

[Ommph]

So we will have another alternative good car to buy at a cheap price........if that is the case.

[Jusnel]

maybe we will get "buatan in malaysia" VW cars in the future.....

 

they can compete with thai made and china made cars liao.....

[Verve]

premium conti car design, tech, half german build at thaiyota price

 

wouldnt mind considering a proton if thats the case

 

but don t know if it will come to our shores cos it will affect vw, audi and skoda's sales as they essentially use the same tech - different trim and quality of cos

[Verve]

malaysia tah bolen ...............vw boleh

[Ommph]

i just hope dat they dun specs out too much things.............

[Jusnel]

they will definitely come to our shores.... and they will stop importing from original countries. its common biz sense to do it.....

 

VW will use this msia plant to make and sell cars for this asia pacific region.

 

maybe PI will sell the original cars, while the AD will sell the msia made cars....

 

same thing as what's happening now to japanese cars...

[Yeshe]

Imagine if one bought the shares @ RM0.95, den now shoot to RM6.80

 

sa la sa la, went up RM0.95, NOT from 0.95 to 6.80

[Verve]

wondering will they use the vw badge or keep the proton badge, i am hopeful that they keep the proton badge or else if cars and cars distribute the made in malaysia vw then the margins are gonna be

[Seanboi]

wonder what will happen to all the half past six quality cars that proton churned out recently like the gen 2 waja and savvy - will vw send these to scrap and come out with skoda clones ??

 

and what about wira -

 

I dun mind sia.. Skoda clone still got VW DNA inside and at a lower price tag.

[Seanboi]

opps... guess i saw wrongly.

[Miles]

Higly possible VW will use Proton's Tg Malim plant to assemble their VW cars to sell it this the SEA region (which is an emerging market for new car growth), much like Ford's Philippines plant assembling Ford Focus to sell to SEA region.

 

But whether they'll develop the Proton name/marque is another question. Maybe re-badge Skoda cars as Proton (less development and design cost)... just like what GM did by rebadging Chevrolet with Daewoo and some Opel cars.

 

Another indication of VW's forray into Asian markets in which they choose Proton/Malaysia is, their initial talks with India to build a manufacturing plant there has fall through with VW paying Indian government