PM Badawi Anxious to Meetup With Volkswagen?

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Apr 01 2007
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Poor sales is hitting Proton Holdings Bhd (KLSE: PROTON, stock-code, 5304) dealers real hard that Proton Edar Dealers’ Association president Wan Ahmad Sepwan Wan Abdul Rahman claimed depleting sales over the past year may force about 70% of the national car sales and service dealers to go out of business.
There were almost 400 Proton dealers nationwide, which was far too many for a single brand, causing the sales to be spread thin. It was reported the dealers suffered a nine per cent drop in sales with losses amounting to RM 240,000 last year. Every dealer has to sell between 35 and 40 cars a month to sustain their operations but since last year they could sell only between 10 and 15 cars a month.

Right after
Volkswagen Bids Farewell to Proton, it was reported that Malaysian Prime Minister Badawi was pushing into higher gear and anxiously arranging for a meetup with top officials from German giant Volkswagen AG (FRA: VOW) over the future of ailing national automaker Proton. Malaysia missed a Saturday deadline to name a strategic partner for Proton but the deputy Prime Minister Najib was reported as saying “It doesn’t matter”.
Earlier this month, negotiations with French car giant PSA Peugeot-Citroen (EPA: UG) collapsed in what has turned into a long running saga to find a partner for the struggling Malaysian company. Proton posted a third consecutive quarterly loss of 281.45 million ringgit (80.40 million dollars), in the three months to December compared with a net profit of 86.51 million ringgit a year earlier.

Would the Malaysian government back down from its’ ridiculous conditions thinking the giant carmakers will help turnaround the sick Proton free-of-charge? While Proton is in desperate for a strategic partner who can help the national carmaker, the foreign partners, meanwhile, are dragging and buying time to get the best deal possible. Such scenario shows how fragile Proton is in the small market of less than 30 million population of Malaysia. It has tried to expand/export to overseas such as Britain and Australia but due to its’ weak quality, it only stands better than Yugoslavia’s car in one of the study.

It was said that the buyers from Malaysia themselves are avoiding the car (if possible) which besides costing higher than an export version, it lacks the basic safety features such as airbag or ABS – which are the main factors contributing to high road fatalities in the country. With the slight liberalization of foreign cars recently, Proton which enjoyed the bias protection in terms of ridiculous high import-tax prior has suddenly collapse in sales.

So, will Volkswagen, the most potential partner so far, is willing to resume talk with Proton now that the Prime Minister himself is putting the matter as top priority? Will Proton losses its shine in terms of either the brand-name or controlling stake or even the possibilities of major restructuring involving retrenchment?

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It’s rare for a head of state to negotiate directly with foreign businessmen. But then, these are desperate times for Proton. But then again, if a head of state can find the time to officiate the opening of a nasi kandar outlet in Perth while many of our rakyat were displaced by floods in the Iskandar Developmetn Region, what’s that compared to an ailing national carmaker with thousands of Malaysian jobs at stake.

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