Friday September 11, 2009

Proton in talks with VW again

By JAGDEV SINGH SIDHU

This time the discussions are likely to centre on collaboration in platforms and engines

KUALA LUMPUR: Proton Holdings Bhd is in talks with Volkswagen (VW) that could lead to a strategic partnership and the assembly of vehicles at the national carmaker’s plant in Tanjung Malim.

The partnership was not expected to see the German auto giant taking an equity stake in Proton but a collaboration in platforms and engines was likely being negotiated, said market sources.

The talks between Proton and VW come at a time when DRB-HICOM Bhd is also engaged in discussions with the German company to assemble cars in Pekan.

“For the long term of the company, it (Proton) needs a partner because the size of Malaysia’s market might not be enough to sustain an independent producer,’’ said UOB KayHian research head Vincent Khoo.

Golf GTI is one of Volkswagen’s popular models in the local market

News that Proton is again in talks with VW is somewhat surprising as both parties have come to, and walked away, from the negotiating table numerous times.

A couple of years ago, Proton came close to inking a deal with VW which would have seen the German company taking a stake in the national carmaker.

A last-minute pitch by the Proton management to build on the company’s own “green shoots” then persuaded the Government from sealing an agreement with VW.

Proton found commercial success following the launch of the Persona but did not escape the global recession caused by the US financial crisis.

Its finances have improved with the launch of the Exora and for its first quarter ended June 30, it reported a net profit of RM54.6mil. The company’s shares closed three sen lower at RM3.71 yesterday.

Now, however, the timing is different.

Proton has maintained it needs a strategic partner but would agree to one on its own terms.

It is also understood that the Government would like Proton to have a strategic partner before the review of the National Automotive Policy is completed.

VW’s interest in Malaysia, too, has grown over the past couple of years after equity stake talks with Proton ended.

It has established its own sales and service business in Malaysia, and as of Sept 7, has seen the number of cars sold reach a total of 2,261 units after 2½ years of operations.

VW is reported to be looking at Malaysia as its sourcing hub for auto components in the region to fulfil its worldwide production and has intimated plans to expand its presence in the country through the local assembly of some of its cars.

Volkswagen Group Malaysia Sdn Bhd managing director Andreas Prinz on Wednesday was quoted by Bernama as saying the group was also thinking of making Malaysia its hub for parts distribution in South-East Asia.

“They will not be looking only at Malaysia’s market but use Malaysia as a sourcing hub for worldwide production,’’ he said.

VW is also interested in assembling cars in Malaysia and Prinz said the company was in discussion with a number of parties.

“Currently, in the automotive industry, everybody is talking to everybody, but we are focusing on CKD,” he said.

Malaysia remains an important market in the region as it is the largest passenger car market in South-East Asia, which is said to be an attractive element for VW.

SOURCE: The Star 11 September 2009 Page 1, Business Section.