Malaysian PM confident of Proton-VW deal

The European auto company Volkswagen is studying Malaysia's car maker Proton for a possible strategic alliance, Prime Minister Abdullah Ahmad Badawi confirmed for the first time.

He told AFP late Wednesday it was important for Proton to be "comfortable" with its potential partner.

"And as soon as that is confirmed, then I believe we must tie up the deal as quickly as possible," he added, in the first official confirmation that talks between the Asian and European car makers were going on.

He gave no other details of the possible tie-up.

If the alliance is pushed through, it is expected to give Proton a boost in efforts to reclaim its top spot in the local car market as well as help it get a foothold in the lucrative European market.

Abdullah said Proton's launch on Wednesday of its flagship sedan, the Persona, had "nothing to do" with the timing of Volkswagen's "due diligence" study.

"But it does prove to everyone in the world that Proton is still capable of coming with an excellent and superb product," he said on the sidelines of an awards ceremony.

"We are confident that Persona is the product that will put Proton back in the map and as the leader in the Malaysian market."

Persona replaced the 14-year-old Wira model, whose sales have fallen. The sleek 1,600 cc Persona sedan is aimed at helping Proton recover its formerly dominant position in the local car market, now held by rival Perodua.

Proton recently reported bigger-than-expected net losses of 591.36 million ringgit (172.4 million dollars) for the year to March 2007.

State investment arm Khazanah Nasional, which owns 42.74 percent of Proton, is the controlling shareholder, while the State pension fund EPF and national oil firm Petronas own 12.07 percent and 8.84 percent respectively.

Trade Minister Rafidah Aziz said the government would ensure Persona was marketed well in the region and Europe.

"We are very happy with the blueprint programme on Persona and we are confident this car can make it in the international market.

"In fact, the government has already set aside 50 million ringgit in order to help Proton in implementing their marketing programme in the region and also Europe," she said.

Proton expects Persona sales to reach from 30,000 to 40,000 units in the next 12 months.

"Already 2,200 bookings have been made so far, and these bookings have been made by customers who have not even seen the actual car," chairman Mohammed Azlan Hashim said, adding that new models were on the drawing board.

Proton also plans to export the model to Singapore, Thailand, Indonesia, Australia and Britain.

It recently won a contract from China's Youngman Automobile Group to export 30,000 fully-assembled cars to Youngman over the next 20 months, and 150,000 kit units over the next six years.

The cars will be sold in China under the Europestar brand with a price range of between 125,000 and 130,000 yuan.

Earlier this month, Proton said it was also exploring the possibility of setting up a plant in Egypt next year in a bid to enter the African and West Asian market.