Malaysia's Proton says Volkswagen ditches tie-up talks

7th June 2010, Comments 0 comments

Malaysian carmaker Proton said Monday that Europe's biggest automaker Volkswagen has scrapped alliance talks, a move expected to dent its attempts to conquer export markets.

Announcing the failure of the new round of talks, state-controlled Proton said Volkswagen would have been an "interesting" partner.

"During preliminary talks between the parties, Volkswagen confirmed that it currently has other priorities and that a potential collaboration with Proton could not be pursued," it said in a statement.

In 2007, the two companies were close to a possible tie-up, but talks were brought to a sudden close in November 2007 when the Malaysian government said it was no longer seeking a foreign partner.

Proton has been searching for a collaborator in a bid to penetrate foreign markets and develop attractive models to compete with growing competition from Japanese, European and Korean carmakers in its domestic market.

Ahmad Maghfur Usman, an auto analyst with OSK Research, said that without a strategic partner Proton will find it difficult to find success in export markets and will continue to depend heavily on the domestic arena.

"Proton will be able to survive even if they do not find a partner by selling in the domestic market, but margins will be low and it could slip further behind their competitors like Hyundai," he told AFP.

Ahmad said Proton's total production for its March 2010 financial year was 184,000 units, with 86 percent sold in Malaysia, while its plant utilisation was only 50-60 percent.

"A strategic alliance will allow Proton to optimise its low plant utilisation," he said.

Proton was formed in 1983 by then-premier Mahathir Mohamad as part of an ambitious national industrialisation plan. But it has suffered from a reputation for unimaginative models and poor quality.

Proton's net profit for the three months to the end of March stood at 22.8 million ringgit (6.87 million dollars), compared to a loss of 323 million ringgit in the same period a year ago.

© 2010 AFP

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