Proton, VW close to an accord
Friday, June 8, 2007
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 yesterday.
Citing unnamed sources, The Edge Financial Daily said a new company would be created which will see Volkswagen (VW), 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.
But a Volkswagen spokesman rejected the idea that the company was on the cusp of concluding talks with loss-making Proton.
"That is a rumour without any substance," the spokesman 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 yesterday on the news. At the morning close, Proton was up RM0.95 ($0.426) or 16.24 per cent at RM6.80.
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.AFP, Reuters
Citing unnamed sources, The Edge Financial Daily said a new company would be created which will see Volkswagen (VW), 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.
But a Volkswagen spokesman rejected the idea that the company was on the cusp of concluding talks with loss-making Proton.
"That is a rumour without any substance," the spokesman 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 yesterday on the news. At the morning close, Proton was up RM0.95 ($0.426) or 16.24 per cent at RM6.80.
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.AFP, Reuters
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