Malaysia: Carmaker Proton Needs Equity Partnership In Five Years, Says Official

Malaysia: Carmaker Proton Needs Equity Partnership In Five Years, Says Official

13 June, 2008

KUALA LUMPUR, MALAYSIA: Malaysia's national carmaker Proton may need to form an equity partnership with another auto maker within five years to remain competitive, a senior government official said Friday (13 June).

The company has returned to the black in its recent fiscal year ended 31 Mar but it is still not out of the woods, said Azman Mokhtar, Managing Director of government investment arm Khazanah Nasional. Khazanah is the biggest shareholder in Proton with a 43% share.

Proton needs a tie-up that will enable it to integrate into the global supply chain to be able to boost its sales abroad, Azman said.

"Size and scale matter and Proton needs to be in a bigger family," he told reporters, adding that an alliance with another automaker within five years is to be expected. He didn't elaborate.

The Malaysian auto maker in November ended tie-up talks with Volkswagen and General Motors Corp., saying it could return to profitability on its own by selling more cars overseas. The decision was partly due to the government's refusal to let foreigners take control of Proton, seen as a national icon.

Proton posted a net profit of 202.9 million ringgit (US$63 million) for the fiscal year ended March 31, rebounding from a loss of 589.5 million ringgit the previous year, thanks to improved sales.

Analysts have said the profit was largely due to a government research and development grant of 194 million ringgit (US$61 million) and previous years tax overprovisions, which were lumped under income.

Stripping these out, Proton would have made an operating net loss of 32 million ringgit (US$10 million) for the year, they said.

Proton's share of the domestic passenger car market slumped to 24% last year, from 60 percent in 2001, as more Malaysians buy imported vehicles as the auto sector liberalizes.

Although Proton's domestic sales have picked up this year, analysts said it will still need a strong foreign partner to penetrate global markets.

Proton plans to launch its first multipurpose vehicle early 2009 to boost its export and market share. Multipurpose vehicles include larger vehicles like minivans. Proton has traditionally made only passenger cars.

It also plans to intensify exports to China, India, Southeast Asia and the Middle East to double total sales to 300,000 units by 2010. (AP)