Proton shares dip on fears that talks with VW may fail
Proton shares dip on fears that talks with VW may fail
Associated Press, Kuala Lumpur, Malaysia
Shares of Malaysia's national car maker Proton fell 3.6 percent on Monday morning amid concerns that a proposed alliance with German auto giant Volkswagen AG may collapse, traders said.
Proton shares fell to 8.05 ringgit at the end of morning trade, down 0.30 ringgit from their close on Friday.
Traders said news that Proton was eager to acquire two basic vehicle designs from Volkswagen sparked concerns that Proton may not be successful in selling an equity stake to Europe's largest carmaker.
Traders said it made no sense for Proton to buy the Volkswagen vehicle platforms since the two companies were already in talks for an equity tie-up that would eventually lead to a technical collaboration. The implication was that the planned collaboration may not happen, traders said.
The Edge business weekly on Monday quoted an unnamed Proton official as saying that the Malaysian car producer was interested in buying platforms for the popular mid-sized Passat saloon car and the Sharan multipurpose vehicle in a rush to produce new models to curb falling sales.
The magazine said Proton is hoping to acquire the platform for the old 1996 Passat model, which is shared by the Audi A4 car.
The report didn't say how much Proton would pay for the platforms. Proton officials weren't immediately available for comment.
Faced with a shrinking market share and growing foreign competition, Proton has been searching since last year for a new foreign alliance following the withdrawal of its longtime Japanese partner Mitsubishi.
Proton has long enjoyed government protection in the form of high tariffs on foreign cars. But as tariffs are being whittled down under a regional free trade pact, its market share has dwindled from 57 percent in 1993 to around 30 percent in June.
The car maker sank into the red in the quarter that ended in June, and is also suffering from an absence of clear leadership since its embattled chief executive was ousted in August.
Analysts say a tie-up with Volkswagen may be just the antidote needed to lift sales at home and abroad, and ensure its long-term survivability as foreign competition heats up under Malaysia's auto liberalization.
But some auto analysts warned Volkswagen may abort the alliance if it can't obtain a majority stake and management control.
Proton, controlled by the government's investment arm, Khazanah Nasional Berhad, last month said it is open to selling an equity stake to Volkswagen but will not cede control to Europe's largest carmaker.