Sat, 12 Mar 2005

From: AFP

Malaysia rules out carmakers' merger

Agence France-Presse, Kuala Lumpur

Malaysia's trade minister on Thursday ruled out the need to merge national carmakers Proton and Perodua to boost their competitiveness, saying a tie-up was not beneficial now as they compete for different markets.

However, the government did not rule out the possibility of some degree of "rationalization" in the future when circumstances change.

"It's not as simple as the theory of merging. You must remember Proton and Perodua are (competing) in different category of vehicles," Rafidah Aziz told a news conference.

"That will only make sense if they are competing in the market place for the same models and makes of cars and in terms of capacity.

"When the time comes, I do believe there might be some rationalization but for now, I don't think there is a necessity," Rafidah said.

Primary national carmaker Proton was set up in 1983 as part of Malaysia's drive into heavy industry while Perodua began operations in 1995 as a producer of small and fuel-efficient compact models.

The country's auto parts manufacturers earlier this week said a Proton-Perodua merger would give them the economies of scale to penetrate global markets and survive foreign competition.

They said Malaysia can afford to support only one national car manufacturer as the country's auto market gradually liberalizes under the Association of Southeast Asian Nations (ASEAN) Free Trade Area (AFTA) agreement.

The other two Malaysian auto companies with national car status are Naza Kia and Inokom Hyundai.

Perodua chairman Asmat Kamaludin has dismissed talks of merger with Proton due to Daihatsu's stake in Perodua but has said they were already cooperating in some area, including the development of Proton engines.

Japanese mini car maker Daihatsu Motor Co. Ltd., which is a subsidiary of Toyota, owns a 51 percent stake in Perodua.

Proton and Perodua jointly control more than 70 percent of Malaysia's auto market but face greater pressure from Japanese and Korean carmakers.

Last year, Perodua's market share dropped to 30 percent from 35 percent in 2003 while Proton's share dropped to 44 percent from 48 percent.

Under AFTA, Malaysia cut import duties to 20 percent on ASEAN cars from January 1 but it said it would delay reducing duties to the required level of below five percent until 2008.