Tuesday, July 19, 2005

Proton to Assemble VW Cars

Text from the Associated Press.

KUALA LUMPUR, Malaysia -- Malaysia's national carmaker Proton and Germany's Volkswagen AG are expected to finalize details of their alliance by the year-end and begin assembly of Volkswagen cars here in the first quarter of 2006, analysts said Monday.
The two carmakers announced a partnership agreement late last year to make cars in Malaysia _ Southeast Asia's largest passenger car market _ but it did not involve any equity participation.

Analysts who attended a Proton briefing last week said the partnership will develop in two phases with the first comprising component sales, manufacturing and distribution, while the second will focus on design and development.

The first phase should kick off in the first quarter next year with the assembly of a localized version of Volkswagen's Passat model, followed by the Fox multipurpose vehicle in the third quarter of 2006 and the Fox hatchback in the first quarter of 2007, the analysts said.

Higher-end Phaeton and Touareg models could be sold in Malaysia in the first quarter of 2006, analysts said. Analysts said they were told that Volkswagen, which earlier this month said it will take seven years working with Proton before it considers a more permanent partnership, is now in discussion to buy an equity stake in Proton.

"We believe the report on VW's need for a gestation period is reasonable since VW could achieve most of its objectives (including increasing its presence in the region and joint-development with Proton) via the joint venture," said an analyst with one of Kuala Lumpur's largest brokerages.

The Edge business weekly reported over the weekend that Proton senior management opposed Volkswagen's bid to take up a substantial stake in the company. But Khazanah Nasional, the government investment arm that has a 42.7 percent stake in Proton, supported the idea.

Officials from Proton, Khazanah and Volkswagen did not immediately return calls.

Proton has long dominated Malaysia's market, but its market share slipped to 45 percent last year with the opening up of the Malaysian market under a regional free trade agreement that reduced tariffs on foreign cars.

Earlier this month, Prime Minister Abdullah Ahmad Badawi said the government is committed to removing protections for Proton and demanded that the company improve its quality to better compete with foreign manufacturers.

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