KL may sell 30% of Proton to foreigners

KL may sell 30% of Proton to foreigners

NORWICH, England (Reuters): The Malaysian government is considering the sale of up to 30 percent of national carmaker Proton to foreign companies and has already had some inquiries from U.S. automakers, Malaysian Prime Minister Mahathir Mohamad said on Friday.

Mahathir said in May that Proton -- which has been feeling the squeeze as one of the smaller players in the world car industry -- was in talks to exchange technology with several car makers, including DaimlerChrysler AG, Ford Motor Co and General Motors Corp.

At that time he said there were no talks about equity participation in Perusahaan Otomobil Nasional Bhd (Proton), which is seen as his brainchild and a symbol of his efforts to make Malaysia a manufacturing economy.

But on Wednesday, the prime minister seemed to soften his stance: "We would sell not more than 30 percent. We will remain the majority shareholders," he told reporters during a visit to the headquarters of UK carmaker Lotus, of which Proton owns 80 percent.

"We have had some inquiries from some of the major automotive companies,... American ones. But we are not in a hurry," he said at the factory in Norwich, eastern England.

Mahathir also acknowledged that Proton lacked the economies of scale -- its annual capacity is just over 230,000 cars -- to compete with big international firms.

The company, which is only 15-years old, would now have to redirect its focus to places where it would have a competitive advantage -- mainly in East Asia, the Middle East and Africa.

Proton has already said that it intends to open factories or form joint ventures in China, India, Egypt and Turkey which will assemble parts from Malaysia.

"When we started, the motor car industry was fragmented and today we see these companies merging. They are very big and very powerful and it is difficult for us to compete," Mahathir said.

"We have to find a niche for ourselves...We will try to sell in Europe, but not in the United States because we are not familiar with it. But are familiar with markets in Asia, the Middle East and Africa," he added.

One big boost for Proton's international expansion is likely to come from a new small engine the company has designed and developed itself for the first time in its history. Until now, Proton has relied on engines from Japanese carmaker Mitsubishi -- which is a minority shareholder in Proton.

The new 1.3 and 1.6-litre SENG petrol engine family, which is being jointly developed with Lotus, will be produced at Proton's Shah Alam factory in Malaysia.

Mahathir said Proton plans to launch the engines 18 months from now, to reach annual production of 180,000 and in the future to develop even stronger versions.

The engines will be fitted on Proton cars initially, but Proton hopes eventually to also sell the engines to original engine manufacturers.