Oct 13, 2006

Proton Will Collapse Without Partner, Mahathir Says

Proton Will Collapse Without Partner, Mahathir Says

Oct. 12 (Bloomberg) -- Proton Holdings Bhd., Malaysia's biggest carmaker, will collapse unless it finds an international partner such as Volkswagen AG, said former premier Mahathir Mohamad, who set up the company more than two decades ago.




"At the rate it is going, it's not going to last long," said Mahathir, 80, who became an adviser to the Shah Alam, Malaysia-based automaker after stepping down as prime minister in 2003. "Proton is reporting losses all the time, and they still have a lot of cars which they cannot sell."


Proton has been losing market share to overseas rivals including Toyota Motor Corp., and needs to gain new technology and designs to compete. Volkswagen ended talks with the Malaysian carmaker in January because the two sides couldn't agree on issues including control of the company. Proton ended an alliance with Mitsubishi Motors Corp. in 2004.

``The government may need to offer a bigger stake or give up management control,'' said Raymond Tang, who manages $1.7 billion as chief investment officer of CIMB-Principal Asset Management Bhd. in Kuala Lumpur. Those are ``the main points which they failed to agree on in previous talks,'' said Tang, who doesn't own the company's shares.

Proton's Chairman Mohammed Azlan Hashim and Managing Director Zainal Abidin Syed Mohd Tahir weren't immediately available for comment, the company's head of corporate communications, Faridah Idris, said by telephone today.

Volkswagen

Proton, founded by Mahathir in 1983 when he was prime minister, produces eight car designs under its brand and two types of Lotus sports cars. The exit of Mitsubishi Motors ended more than two decades of investment by the Japanese automaker.

Proton and state-owned investment agency Khazanah Nasional Bhd., which owns 43 percent of the automaker, are studying whether a foreign investor could revive its fortunes, Malaysia's Second Finance Minister Nor Mohamed Yakcop said Sept. 5.

Selling a majority stake isn't ``absolutely necessary,'' Mahathir said in the interview. Volkswagen, based in Wolfsburg, Germany, didn't want control of the company, he said.

``I still think Volkswagen is willing'' to talk, he said. ``Despite my initial intervention,'' Proton ``seems to be not keen at all to have anything to do with Volkswagen.''

Shares of Proton have fallen 26 percent this year. The stock today fell as much as 2 sen, or 0.4 percent, to 4.86 ringgit and traded at that price at 11:34 a.m. in Kuala Lumpur.

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