Malaysia seeking foreign partner for carmaker Proton

Malaysia seeking foreign partner for carmaker Proton

Agence France-Presse, Kuala Lumpur

The Malaysian government is seeking a foreign partner for
national carmaker Proton to boost its competitiveness, improve
exports and tap new commercial opportunities, reports said on
Wednesday.

State investment arm Khazanah Nasional, the single largest
shareholder in Proton, is looking into the possibility of
allowing a foreign car manufacturer to hold up to 20 percent
equity in Proton, The Star quoted industry sources as saying.

Such a move would increase Proton's technological capability,
create a global distribution link for Proton to sell its cars
abroad and prepare it for market liberalization under the
Association of Southeast Asian Nations (ASEAN) Free Trade Area
(AFTA), they said.

A foreign tie-up would also help Proton gain economies of
scale and cut production costs, they said.

"It is to strengthen the company. The capabilities can be
built up. The sale may well be done within a year. Khanazah is
willing to sell 20 percent but it also depends what the foreign
party's appetite is," the source said.

Proton was set up in 1983 as part of Malaysia's drive into
heavy industry, but its troubled Japanese partner Mitsubishi
Motors Corp. (MMC) sold its entire 7.9 percent stake last month
as part of an internal revamp.

Trading house Mitsubishi Corp., the core of the Mitsubishi
group, holds another 7.9 percent stake in Proton but has denied
it was also preparing to cash out.

Khazanah bought up 4.3 percent of MMC's stake to raise its
interest to about 35 percent. The source told the newspaper that
Khazanah was believed to be in talks to buy Mitsubishi Corp.'s
7.9 percent share to raise its holding to about 43 percent.

Khazanah intends to sell about 10 percent of its stake and has
arranged for national oil firm Petronas, another key shareholder
in Proton, to dispose of another 10 percent, the source said.

"After the disposal, Khazanah intends to still remain Proton's
biggest shareholder."

The New Straits Times said Khazanah was expected to make more
changes at Proton following the completion of the carmaker's
internal restructuring.

Proton has more than 3 billion ringgit (US$789 million) in
cash and has plans to aggressively compete globally, including
introducing up to 20 all-new models on the road over the next
decade and boosting sales to 10 countries including China and
India, the daily said.

The Star said there may be plans to sell Proton's struggling
British unit, Lotus group, amid concern about financial losses
exceeding 800 million ringgit.

Proton has been protected for years by high tariffs on foreign
cars but it will lose its edge under AFTA, where import tariffs
for most products in the region were cut to below five percent
from last year.

Malaysia obtained a two-year reprieve for its auto industry
until 2005 but it recently said it would further defer reducing
duties to the required level until 2008.

Proton's domestic market share tumbled to 49 percent last year
from 60 percent in 2002, with car sales falling 27.5 percent to
155,420 units. It is pinning hopes on its new GEN-2 fitted with
its own Campro engine and two other new models to be launched
this year to revive sales.