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Malaysia's Proton sinks on report VW ends talks

From reuters | April 02,2007

Shares in Malaysia's state-controlled carmaker Proton Holdings (PROT.KL: Quote, Profile, Research) fell nearly 7 percent on Friday after a Singapore newspaper said Germany's Volkswagen AG (VOWG.DE: Quote, Profile, Research) had scrapped plans for a tie-up.

Malaysia had set an end-March deadline to find a strategic partner for Proton to give it greater access to foreign markets and had said it was talking only to Volkswagen, the world's fourth-largest carmaker, about a strategic alliance. Singapore's Straits Times newspaper, quoting an unnamed Malaysian government official, said Volkswagen had told state investment firm Khazanah Nasional Bhd, a key shareholder in Proton, that setting up a production platform in Southeast Asia was not a key priority at this time.

The German firm told Khazanah on Thursday it wanted to focus on building its business in Russia and India, the paper added.

A Proton spokesman had no immediate comment on the report, while officials of Khazanah could not be reached.

"Clearly, they don't want to pour any resources into turning Proton around," the paper quoted the government official as saying. He added an announcement on the collapse in the merger talks could come as early as Friday, the paper said. Malaysian Deputy Prime Minister Najib Razak said on Wednesday the government was not sure it could meet its end-March deadline to find a suitor, though media reports had quoted Volkswagen officials as saying talks were at a "fairly advanced stage".

Proton shares were down 6 percent at 6.25 ringgit at 0230 GMT after falling to the day's low of 6.20, while the broader market (.KLSE: Quote, Profile, Research) was up 0.56 percent.

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