April 7 (Bloomberg) -- Proton Holdings Bhd., the Malaysian carmaker that ended partnership talks with Volkswagen AG in 2007, said it's in early discussions with Renault SA and General Motors Corp. about a technical alliance to help make new models.
Talks are "very preliminary," said Managing Director Syed Zainal Abidin Syed Mohamed Tahir in an interview today in Kuala Lumpur. "We are just discussing how we can explore working together. An alliance is vital. We need to have scale." An equity sale isn't being considered, he said.
Proton needs a partner to develop a new version of the company's Perdana luxury sedan by next year, he said. While new models helped the Malaysian carmaker, which also makes Lotus sports cars, return to profit last year, it still lacks the size to compete with Toyota Motor Corp. and Honda Motor Co. in the home market.
"If they don't improve their economies of scale, then long term, they're going to find it difficult," said Kaladher Govindan, head of research at TA Securities Holdings Bhd. in Kuala Lumpur. "They'll be depleting their cash reserves."
Proton, which had 1.17 billion ringgit ($339 million) of cash at the end of 2008, spends about 500 million ringgit developing each new model, Syed Zainal said. Proton swung to a loss in the final three months of last year as expenses swelled.
An alliance with a foreign carmaker may also build other models that could be sold jointly in overseas markets, Syed Zainal said. Proton is focusing on the Middle East, China, India and Southeast Asia to cut its dependence on domestic sales. The company wants overseas sales to account for 70 percent of the total in the next decade from about 20 percent now.
Renault spokesman Wataru Sato in Tokyo said he is not aware of talks with Proton, nor with any other Asian carmaker.
