Just the Facts:
* Five years of struggle over a Proton partnership having come to naught, VW finds a different partner in Southeast Asia.
* VW and Malaysian conglomerate DRB-HICOM plan to start assembly in late 2011.
* Whether VW will build one or several models is still under consideration.
KUALA LUMPUR, Malaysia — Volkswagen can finally claim success in setting up a production partnership in Southeast Asia. After its attempt to form a partnership with the Malaysian-government-owned company Proton failed, VW has linked with Malaysian conglomerate DRB-HICOM, and both parties have signed an agreement to start assembly in late 2011.
The first model to be produced will be the Passat, followed by the new Jetta. A third model will come later and is likely to be the Polo sedan.
For the past five years, Volkswagen tried hard to form a partnership with Proton, but Proton's indecision, coupled with local political agendas, conspired to waste the Germans' time. They were courted, misled and dumped suddenly and left to find a new way to execute the VW Strategy 2018 Growth Program for the region.
VW's new partner, DRB-HICOM, has been active in the Malaysian automobile industry — including ownership of Proton at one time. With its large manufacturing complex on the east coast of peninsular Malaysia, where Mercedes-Benz assembles its S-Class, DRB-HICOM was a logical choice for VW to assemble its models for the Malaysia market, the largest passenger-car market in Southeast Asia.
Regional exports aren't likely to start as quickly as production. Observers believe VW will want to see how consistent build quality is from its partner's plant, which also assembles the Suzuki Swift and Isuzu trucks. The plant has plenty of spare capacity to handle increased output, because only about a third of its 96,000-unit installed capacity is currently being used.
VW is also assembling the Touran MPV in Indonesia, an appropriate model for that market, but is unable to decide whether to focus on a single model for the whole region. While MPVs are the most popular in Indonesia, pickups are most dominant in Thailand, while Malaysians like sedans. It may be that VW will assign one model to each country and make full use of the ASEAN Free Trader Area (AFTA) provisions for intra-ASEAN distribution.
