Proton in Dire Straits with VW’s Pull Out? Or Not?

The Straits Times, citing a senior Malaysian government official, said that Volkswagen had informed Khazanah Nasional, a government investment arm and Proton’s main shareholder, on Thursday regarding its intentions.

"Clearly, they don't want to pour any resources into turning Proton around," the newspaper quoted the unnamed official as saying.

Oddly though, a Volkswagen spokesman rejected the reports and told Reuters that “There are still talks, including some at the highest level.”

The Malaysian government has also said that it might miss its deadline, which is at the end of March, to successfully attain a partnership deal with the loss-making Proton. The Prime Minister of Malaysia, Abdullah Badawi, said last week that if negotiations with VW failed, they would turn to General Motors.

Earlier on this month, French car giant PSA Peugeot-Citroen had also pulled out of discussions with Proton.

The Malaysian Automotive Association (MAA) said Proton’s car sales for the months of January and February 2007 had fallen 29% to 14,504 cars, down from the same period of the previous year’s 20,475 units. Proton also sold 32.7% less in February 07, compared to 2006 where they sold 10,019 cars.

Having suffered from significant losses in profit because of increased competition from local firms and imports, Proton would benefit very much from a strategic partnership. Currently, Khazanah owns 42.74%, while state pension fund EPF and Petronas hold 12.07% and 8.84% respectively.

Credits: Kr0n