VW any agreement to buy stake in Proton is still 'far away;

VW any agreement to buy stake in Proton is still 'far away;

Jasbant Singh, Associate Press, Kuala Lumpur, Malaysia

Germany's Volkswagen AG said any agreement to buy a stake in
Malaysian national car maker Proton is still "far away," but the
two companies were still in talks to work together to make cars
in Southeast Asia, a news report said on Thursday.

Speculation has been rife that Volkswagen will buy a
controlling stake in the struggling automaker and that the deal
could come with management control of Proton.

The German car maker said it is in talks with Proton and
Khazanah Nasional - the government's investment arm that controls
Proton - to jointly produce new models for the lucrative
Malaysian and Southeast Asian markets, the New Straits Times
reported, citing an unidentified Volkswagen official.

"We are still far away from any agreement on the partnership,"
the official told the Straits Times. "This is with respect to the
operational collaboration as well as any financial involvement of
the VW Group."

Proton officials were not available for comment.

Media reports have said Khazanah, which owns 42.7 percent of
Proton, is in talks with the Wolfsburg, Germany-based automaker
to sell up to 30 percent of the Malaysian company.

Khazanah has confirmed that discussions were being held on
Proton's "proposed alliance with Volkswagen" but said it does not
have any plans yet to divest its existing stake in Proton.

The Straits Times said Volkswagen and Proton have agreed to
launch two car models, the first by the end of this year.

Talks between Khazanah and Volkswagen underscores a government
plan to end its control of state-owned companies facing
competition from overseas.

For more than two decades, Malaysia poured billions into
Proton to turn it, with Japanese help, into the country's top
selling car behind stiff protective barriers.

But globalization is forcing Malaysia - Southeast Asia's
biggest passenger car market with annual sales of 487,000
vehicles - to change. Proton is unable to match the quality of
foreign competitors - something that is exposed with the lowering
of import barriers.

A deal with Volkswagen will give Proton access to German
technical and management know-how.

Volkswagen, meanwhile, will get an opportunity to grow its
market share in Asia, which last year accounted for just 6.6
percent of its 5.1 million sales.,

Proton and Volkswagen last year agreed to work together,
without committing to an equity relationship.