Proton for sale

Last week government ministers said they were in talks with Volkswagon and French rival Peugeot-Citroen about possible acquisition of the Malaysian government’s 42.7 per cent stake.

Peugeot-Citroen last night bowed out of talks and said the company had no plans to buy any part of Proton.

Volkswagon is also no longer believed to be interested after the Malaysian government refused to allow the German car maker to have management control.

Proton has sold 1628 cars in Australia this year, comprising the light cars Satira and Savvy, plus small cars Persona and Waja.

Investment companies including DRB Hicom and the unlisted Naza Group are believed to have expressed interest in the Malaysian Government’s share.

"We submitted a letter of interest to the Ministry of Finance about two months ago and are awaiting word from them," Naza Group chief executive Nasimuddin Amin was quoted as saying in the Star newspaper.

Naza assembles cars in a venture with South Korea's Kia Motors Corp., while DRB Hicom has alliances with Isuzu Motors Ltd., General Motors Corp., Honda Motor Co. and is controlled by politically well-connected businessman Syed Mokhtar Albukhary.

But Malaysian ministers are understood to be seeking foreign investment for Proton.

Proton, established in the 1980s, is an icon of Malaysia's rapid industrialisation.

Its fortunes in Southeast Asia's biggest car market have plummeted from about 60 percent three years ago to just 40 percent this year due to improving sales from second national manufacturer Perodua and cheaper foreign models.

ASEAN's impending decision to liberalise decades-old protectionist policies in its auto sector also could hurt Proton's bottom line, analysts say.

European automakers are attracted to Proton because it gives them a chance to break into the Southeast Asian auto market, historically dominated by their Japanese rivals.

Proton has two plants in Malaysia, with a total capacity of 380,000 cars per year that can be raised to 1.2 million units per year if there is sufficient demand. The plants are currently using only half their capacity.

-With wires