Chances of Proton, VW alliance 'good'

Chances of an alliance between Malaysian national carmaker Proton and Germany's Volkswagen AG are "reasonably good", a cabinet minister said on Monday.

The two carmakers may hold a third round of negotiations, although no timetable is set for conclusion of the talks, Second Finance Minister Nor Mohamed Yakcop told reporters on the sidelines of an international economic conference in Singapore.

The fact that state-owned Proton and VW held their first round of talks in New York earlier this month and met again in Bangkok recently with the possibility of a third round "would almost by definition be a good news", he said.

"If it was bad, if it was not workable, we would have stopped at the first round," Nor Mohamed said, when asked about progress of the talks.

"The fact that we had a first round and a second round and a possible third round means that things are progressing, and the probability of working something out is reasonably good," he said.

The resumption of talks between Proton and VW marked a surprise turnaround after Malaysian Prime Minister Abdullah Ahmad Badawi said attempts to form a strategic alliance between the two had failed.

Nor Mohamed said the government, which holds a 43 per cent stake in Proton through its investment arm Khazanah Nasional, has not rejected General Motors Corp's proposal for a tie-up with Proton, although no negotiations were going on.

"GM's proposal is still on the table. We have not shut the door on any of them," he said.

Asked when a deal could be reached, he said: "We hope to get something soon but really no timetable."

The government, which has been involved in extensive talks with VW and General Motors, is trying to find a foreign partner for Proton to help turnaround the money-losing carmaker.

Proton reported a net loss of 591.4 million ringgit ($A15.37 million) for the year ended March 31, reversing a net profit of 46.7 million ringgit ($A15.37 million) the previous year.

Proton Managing Director Syed Zainal Abidin Syed Mohamed Tahir has said the company believed a foreign partner would help consolidate and strengthen Proton's business. The company will cut costs and work to increase exports, as well as introduce two new models to boost sales, he said.

For years, Proton thrived in a protected environment in which high duties were imposed on imported vehicles, forcing many Malaysians to buy Proton cars. But duties have been slowly lowered in line with a regional trade agreement, and more Malaysians are buying imported vehicles.

Source: AAP 2007

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