Ford talks to Malaysia's Proton on possible tie-up

Ford talks to Malaysia's Proton on possible tie-up

DEARBORN, Michigan (Reuters): Ford Motor Co. has talked to
Malaysia's largest car maker, Perusahaan Otomobil Nasional Bhd
(Proton)., about a possible affiliation as part of its long-term
plans to build market share in Asia, a top company official said
on Thursday.

Henry Wallace, group vice president for Asia-Pacific
operations, said Ford's focus in Malaysia is improving the
manufacturing operations of its joint venture, revamping the
dealer network and introducing new products over the next year.

However, Wallace, who visited Malaysia last week, said in an
interview with Reuters at company headquarters that Ford has held
discussions with Proton, maker of Malaysia's first national car.

"I think everybody has talked with everybody, but we have
talked with Proton," said Wallace, adding there is no timetable
to a possible alliance.

Ford, the world's second largest automaker, is investing $1.5
billion to capture 10 percent of the Asian market by 2007, up
from about 1 percent now. In the last two years, Ford has
announced expansions and other new initiatives in countries it
has singled out as priorities, including Malaysia, Thailand,
Philippines, Vietnam and India.

Although reports surfaced this spring that Ford would re-enter
Indonesia, Wallace said the company has no plans to do so because
of ongoing political and social instability.

After a tumultuous few years, the overall Asian economy
appears to have finished its downward spiral, Wallace said. Some
markets, including South Korea, Thailand and the Philippines, are
showing early signs of recovery.

"Others, such as Japan, I think have clearly bottomed-out, but
what we have not yet seen are any real signs of recovery," he
said.

Wallace said the two main issues facing Asia as it regains its
economic feet are when and how quickly Japan will recover, and
what China decides to do with its currency valuation.

Ford, which lost out to rival General Motors Corp. two years
ago for a $1.57 billion China car project, remains interested in
breaking into the Chinese car market, said Wallace.

The automaker will also try to fix its poor performance in
Japan, where import sales are small but the market is considered
crucial because of its high profile. Ford's Japan sales last year
fell 37 percent to 21,995.

Plans include strengthening dealers, honing the brand image
and improving product consistency, said Wallace. On the product
front, Ford is already making changes. The Ka small car was
introduced in April and the new Lincoln LS sedan is scheduled to
go on sale later this year.

Also, Ford, admitting defeat for the Taurus sedan in Japan,
will not sell the 2000 version there. Company officials have
decided the car, introduced in 1996, was too big for the segment
it was selling in.

Meantime, Wallace said Ford sees no need to spend some of its
$23.5 billion in cash to boost its investment in Japanese
affiliate Mazda Motor Corp.. Ford paid $484 million in April 1996
to raise its stake to 33.4 percent from 25 percent.

Ford is able to leverage Mazda's Asian presence to help its
own regional expansion, Wallace said. And in Taiwan, for example,
Mazda is able to cut costs as it relaunches there by
consolidating back-office operations with Ford.

"We invested what we felt we should do in the Mazda
relationship," he said. "We're very comfortable with that and
it's proceeding. We're busy working on other issues for growth
for the future."