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PROTON HOLDINGS: Government Won't Sell Entire 43% Stake to VW

Troubled Company Reporter, June 21, 2007

The Malaysian government, through state investment arm Khazanah Nasional, will not sell its entire 43% stake in national car maker Proton Holdings Bhd to Germany's Volkswagen, Reuters reports, citing Najib Razak, the country's deputy prime minister.  

"It's the national car," Mr. Najib was quoted by Reuters in an interview with the Bloomberg News.  "It can't be all of the stake."

According to Mr. Najib, Volkswagen wanted a "substantial" stake in Proton and that the German firm possibly wanted a stake in the manufacturing division.  "If we want a foreign strategic partner then we have to accept the fact that it has to be run on a commercial basis," the depute prime minister told Bloomberg.  

Volkswagen and Proton have been in talks for a possible tie-up aimed at helping the Malaysian car maker turn itself around, previous reports from the Troubled company Reporter - Asia Pacific said.

Headquartered in Selangor Darul Ehsan, Malaysia, Perusahaan Otomobil Nasional Berhad or Proton Holdings Berhad -- -- is engaged in manufacturing, assembling, trading and provision of engineering and other services in respect of motor vehicles and related products.  Its other activities include property development, trading of steel and related products, engine and technologies research, development of automotive related technologies, investment holding, importation and distribution of motor vehicles, related spare parts and accessories, holds intellectual property, provides engineering consultancy, operates single make race
series and carries out specific engineering contracts.  The Group's operations are carried out in Malaysia, England, Australia, Socialist Republic of Vietnam and the United States of America.

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Proton was reported as among Malaysia's worst performing companies in 2005, after competition from foreign carmakers and a lack of new models lost the firm local market share and subsequently led it into a loss.  It has since brought in a new chief, sold its loss-making MV Agusta motorbike firm and pledged to find a new technology partner.  The Company has been under increasing pressure, with its share of domestic sales falling to 44% from 75% over the past decade.

The Troubled Company Reporter - Asia Pacific reported on May 4, 2006, that Proton was expected to finalize a recovery plan and seal an alliance with a strategic partner, in order to boost sales and become more competitive.

However, the carmaker until now has yet to name a strategic partner.  On May 23, 2007, the TCR-AP reported that Proton Holdings may need a government bailout if talks to sell a stake to a foreign investor continue to falter.

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