Gov't mulls Proton-Volkswagen tie-up
Malaysiakini
Nov 9, 2006

The government today said it may allow German carmaker Volkswagen to gain a controlling stake in national carmaker Proton, a move that would help turn around the fortunes of the ailing company.

"It is an option we are considering at the moment. There is no approval yet," said Prime Minister Abdullah Ahmad Badawi.

"It all depends on detailed discussions. It is just an option," Abdullah told reporters.

The Sun newspaper reported the market was abuzz with speculation that embattled Proton was making renewed efforts to find a partner.

The report cited industry sources as saying that Volkswagen was mentioned as one of the "potential partners" to take a 51 percent controlling stake in the national car company.

Proton's share price price was sharply higher on news of the possible partnership. Near the close of trading Thursday, the stock was up RM0.20 at RM5.40, off a high of RM5.70.

Earlier attempt

Proton was previously in negotiations with Volkswagen over a cooperation accord but the talks collapsed early this year after the Malaysian carmaker said it would not cede control to the German company.

Earlier in the week, reports said Malaysian auto company Mofaz Group wanted to acquire part of the 38 percent stake in Proton owned by the government's investment arm, Khazanah Nasional, and take control of the company.

Proton recently signed a letter of intent with PSA Peugeot-Citroen to evaluate and study possible cooperation, with the first round of talks beginning in September.

Analysts say Proton needs to find a strong foreign partner to help revive its fortunes - it reported a RM58.6 million loss in its first quarter to June.

The company's market share has fallen steadily in recent years as the auto market has been liberalised to allow greater foreign competition.