Thursday, October 28, 2004

Malaysia’s Proton ties up with Volkswagen

KUALA LUMPUR: Malaysian national car-maker Proton said yesterday it had formed an alliance with Germany’s Volkswagen AG that could lead to technology sharing and joint development of cars but there were no plans for Europe’s biggest auto maker to take a stake in Proton.
In a statement to the stock exchange, Proton said it had signed a memorandum of understanding with VW to “establish a long-term partnership which allows each party to exploit the strengths of the other.”
As part of the deal, Proton will manufacture selected VW models for sale locally and abroad, and will be the national distributor of VW cars in Malaysia, it said.
In return, VW “will allow Proton access to its engines and other components and shall support Proton in adapting engines and gearboxes” for use in Proton cars. VW will also develop a programme to boost production standards at Proton plants and its major vendors. At the same time, VW will study opportunities to utilise Proton’s technical expertise and facilities for the joint design and development of cars, Proton added.
In Frankfurt earlier, VW said it had “no plans” to take a shareholding in Proton and that both parties would “retain their full corporate independence” despite their new strategic partnership.
Following the recent withdrawal of Japanese giant Mitsubishi Motors after a 21-year alliance, Proton has been hunting for a new foreign partner to remain competitive ahead of market opening in January under the Association of Southeast Asian Nations (Asean) Free Trade Area (AFTA).
Although the tie-up with VW did not involve any equity sale, analysts said it could bolster Proton’s exports and prevent domestic sales shrinking.
Prime Minister Abdullah Ahmad Badawi, who is also finance minister, welcomed news of the alliance between the 38 per cent state-owned Proton and VW. “Certainly it is significant ... I believe cooperation between Proton and Volkswagen will benefit both sides,” he said.
VW, which is the biggest foreign carmaker in China with nearly 30 per cent of the market, said the deal would enable it to establish a foothold in the fast-growing car market of Southeast Asia “without having to make extensive capital investments in the region.
“The primary aim is to build up an automobile industry of global market standard in Malaysia, exporting to other countries in the region as well as supplying the local market. Opportunities for joint vehicle development will also be closely examined.”
As a first step, VW and Proton agreed to begin preparations for the assembly of two models from kits. The collaboration would initially involve only the VW brand.
“The goal is to launch the first models assembled in Malaysia into the local market by the end of 2005. The initial sales target for 2006 is to top 15,000 units,” VW said.
VW’s 45 manufacturing plants worldwide produce the Volkswagen, Audi, Seat, Skoda, Bentley, Bugatti, Nutzfahrzeuge and Lamborghini brands.
Set up in 1983 as part of Malaysia’s drive into heavy industry, Proton used to sell six out of every 10 new cars in the country but its market share fell to 49 per cent in 2003 and dipped further to 44.5 per cent in the first eight months of this year as sales tumbled.
Under AFTA, import tariffs for most products in the region were cut to below five per cent in the past year. Malaysia obtained a two-year reprieve for its auto industry until 2005 but has since said it would defer reducing duties to the required level until 2008.

Parent site: "Focus on Malaysia"