Volkswagen Says Porsche Offer Won't Hurt Proton Talks

By From bloomberg | Mar 28 2007
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Volkswagen AG's talks with Malaysia's Proton Holdings Bhd. won't be affected by Porsche AG's increased investment in Europe's largest carmaker.

Porsche, the maker of the 911 sports car, yesterday said it bought an additional 3.6 percent of Volkswagen, taking its stake to 30.9 percent. Volkswagen, seeking a platform to expand in Southeast Asia, said earlier this month talks with state- controlled Proton are ``fairly advanced.''

Porsche's offer ``does not impact the talks between Volkswagen and Proton,'' Volkswagen said in an e-mailed statement today in response to queries.

Unprofitable Proton, which in February reported the lowest quarterly sales in at least seven years, has been seeking an alliance since a partnership with Mitsubishi Motors Corp. ended in 2004. It needs technology and designs to compete more effectively.

Malaysia's government controls Proton through a 43 percent stake held by its investment unit, Khazanah Nasional Bhd. Former Prime Minister Mahathir Mohamad, who set up Proton in 1983 to be the bedrock of the country's manufacturing industry, said last year the business will collapse without a foreign partner.

Shares of Proton, based in Shah Alam, fell 5 sen, or 0.7 percent, to 6.80 ringgit at 9:05 a.m. local time. The stock has risen 3 percent this year, compared with the 14 percent gain in Malaysia's benchmark stock index.

Porsche bought the additional stake in Volkswagen to defend the carmaker against possible influence from hedge funds and buyout firms. Volkswagen Chairman Ferdinand Piech, whose family controls Porsche, has increased his dominance since Porsche first bought a stake in 2005, installing Porsche executives on the board, and forcing out the chief executive officer.

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