Malaysia Sets December Deadline For Proton Acquisition

Anthony Fontanelle
August 24, 2007

Troubled Malaysian automaker Proton is looking for a helping hand and the Malaysian government is doing its best to get the largest European automaker Volkswagen AG to invest in Proton. Three rounds of talks have been going on between the Malaysian government which owns the majority shares of Proton and the German automotive giant. After these rounds of talks, the Malaysian government is confident that they may close the deal with Volkswagen this year.

A top official in the Malaysian government said that they are looking to close the deal by December this year. The deal is expected to give Proton the boost that it needs to compete well with its competitors in the Malaysian auto market. It is common speculation that Volkswagen will be marketing Proton vehicles out of the Asian country while Proton will give Volkswagen a stronger foothold in the Malaysian auto market.

Nor Mohamed Yakcop, second finance minister, said: "The good news is we are still talking. Things are happening. Discussions are on-going (and) hopefully we will resolve it soon." When asked whether the negotiation will be completed by the end of the year, the official said that "that is a reasonable target".

In the past, Proton is the largest automaker in Malaysian auto market. With the backing of the Malaysian government, the automaker was able to offer vehicles which are priced significantly lower than their competition. But last year, Proton's title as the largest Malaysian automaker was taken away by Perodua. Although the latter focuses on the development of small compact cars, the buying trend in the Malaysian auto market shifted to small cars. One of the most formidable opponents of the automaker is Toyota which is expanding its operations in Malaysia.

With market shares dwindling, the Malaysian government now looks to partner Proton with an automaker that has the resources and the reputation that can turn around the fate of the Malaysian automaker. Volkswagen has been known for its aesthetically excellent cars and reliable parts such as VW radiators and such. The German automaker also has the capital to invest in the Malaysian automaker.

Although Volkswagen is not the only automaker interested in the acquisition of the Malaysian automaker, the Malaysian government clearly favors the European automaker. General Motors is also interested in the Malaysian automaker but there have been no reports as to talks being held between the Detroit automaker and the Malaysian government. Volkswagen can expand its presence in the global auto market if it decides to acquire Proton. This maybe is what General Motors has in mind as per why they are interested in Proton.

The Malaysian automaker is currently showing signs of resurgence as the automaker posted its highest sales output for this year last month. The increase in sales for the month of July maybe signs of Volkswagen's effect on Proton's reputation. The Malaysian automaker recently unveiled the new Proton Persona which it hopes can turn around the fate of the company giving Volkswagen more reasons to invest in the Malaysian automaker. Proton though has a lot more ground to cover as it lost a total of $172.4 million from last year until March of this year.

Source:  Amazines.com