Malaysia rules out carmakers' merger

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.