VW may acquire majority stake in Proton

Volkswagen is on the verge of buying a majority stake in languishing Malaysian marque Proton, according to Asian media reports.

Malaysian Prime Minister Abdullah Ahmad Badawi has conceded that Proton and Volkswagen are in negotiations, but has so far declined to give details of the deal. It's believed an official announcement will be made on February 8.

Some reports suggests VW could pay up to $650m for a 51 per cent stake in Proton, but these figures are likely to be pure speculation at this stage.

Proton has in the past promoted itself as the 'BMW of Asia', but the reality is that its Japanese and South Korean rivals have caned it in the marketplace. Even in its home market of Malaysia, Proton's share has declined from 57 per cent in the early 1990s to around 30 per cent.

Such is its plight that Proton has even lost the mantle of Malaysia's top-selling brand to arch rival Perodua.

The tale isn't much different locally as Proton registered just 2008 Australian sales last year, compared with a tally of 3182 in 1998.

Consequently, Proton stands to benefit by securing a deal with VW, which would give it access to the German car-maker's technical and marketing know-how. VW, on the other hand, would benefit by gaining a stronger foothold in Asian markets, which last year accounted for less than seven per cent of its global sales.

Although unconfirmed, it's believed the deal would also give VW a controlling stake in British sports car specialist Lotus, which has been 80 per cent owned by Proton since 1996.

The sale of Proton has been on the cards since mid-2006 and bidders linked with a proposed acquisition include General Motors and PSA Peugeot-Citroen.

News of the proposed sale to Volkswagen has already had a positive effect for Proton, as its share price rose by over 13 per cent last Friday.

The Malaysian government currently owns 59 per cent of Proton, including a 43 per cent stake held by its investment arm Khazanah Nasional.