Malaysian officials said Friday talks were back on with Volkswagen in an apparent last-ditch attempt to forge a strategic alliance for besieged national carmaker Proton.
Prime Minister Abdullah Ahmad Badawi had said late Thursday that the talks with Volkswagen had failed, leaving the struggling carmaker with few options for a foreign partnership seen as vital to Proton's fortunes.
"I have decided, since Volkswagen is not interested in the proposal that Proton wants in terms of equity, Proton needs to talk to other people," Abdullah was quoted as saying by the state Bernama news agency. But in what has become a long-running saga to find a partner for Proton, a senior government official Friday said the negotiations were back on.
"After the prime minister made the announcement, Volkswagen requested a final round of talks," the official told AFP. State investment arm Khazanah Nasional owns a controlling 42.7 percent stake in Proton, and managing director Azman Mokhtar said negotiations were ongoing with Volkswagen as well as US giant General Motors.
"I can categorically say today that all the reported interested parties, including Volkswagen and General Motors, remain in the picture," Azman told reporters.
"We are very concerned with the performance of Proton - its decline both operationally and financially, and structurally within the industry," he said. Azman said it was "not inconceivable" for Proton to have both a foreign as well as a local partner.
Prime Minister Abdullah has said that Malaysia will turn to General Motors if talks with Volkswagen were to fall through. Nearly six months of negotiations with French car giant PSA Peugeot-Citroen for an alliance collapsed in March while talks with Mitsubishi of Japan have also been unsuccessful. The latest news came as Proton posted larger than expected net losses of 591.36 million ringgit (174 million dollars) for the year to March 2007.
The carmaker blamed weak sales and higher production costs for a reversal from the previous year's profit of 46.69 million ringgit. "They have to turn around. They cannot be going on making losses," Abdullah said. The government is under intense pressure to forge a partnership between Proton and a foreign auto manufacturer to provide the ailing company with expertise to arrest a sharp decline in market share.
It has missed two self-imposed deadlines to find a partner and the government Friday set a new timeframe. "We will decide on the partner for Proton within the next three months," Second Finance Minister Nor Mohamed Yakcop was quoted saying by Bernama news agency. The state owns 59 percent of Proton and analysts have partly attributed difficulties in forging partnerships over government reluctance to cede control of a key national company to foreign hands.
A previous round of talks with Volkswagen broke down in January 2006 after Proton rejected what it said were "inappropriate" plans by the German carmaker to exert control over Proton. Three Malaysian automotive companies have expressed interest in acquiring all or part of the government's stake.