PROTON Fails to Beg VW – Expect More Failures

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Jun 01 2007
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Finally Malaysia premier Abdullah Badawi admitted Germany’s Volkswagen (FRA: VOW) wasn’t interested in Proton after France’s PSA Peugeot-Citroen (EPA: UG) asked the Malaysia’s loss-making to fly-kite earlier on. The state-run automaker yesterday reported a loss of 591.4 million ringgit ($174 million) for the 12 months ended March 31. During a press-conference, Badawi said “They have to turn around … They cannot be going on making losses … They have to do whatever they think is necessary”.
Second Finance Minister Mohamed Yakcop said the following “Even though Volkswagen is no longer interested, we have to look for other”. Nor Mohamed declined to say whom the government was talking to, but added that it had to move fast to find a partner for state-controlled Proton Holdings Bhd (KLSE: PROTON, stock-code 5304). Asked if a decision on Proton’s partner could be made within the next three months, he said, “Certainly.” If you believe his statement again, I wouldn’t know what to say. I wouldn’t be surprise if Proton is actually NOT talking to anyone at this moment.
Malaysia’s government, which controls Proton through a 43 percent stake held by state investment arm Khazanah Nasional Bhd., has been searching for a partner for the carmaker since an alliance with Mitsubishi Motors Corp. ended in 2004. Abdullah had said earlier that Malaysia would talk to US motor firm General Motors if talks with Volkswagen were to fall through.

Now, it seems the only candidate left for Proton is General Motors Corp. (NYSE: GM, stock) who earlier rumored (Business Times) to be willing to fork out as much as 10 ringgit (US$2.85) for each Proton share earlier in January 2007. Of course you have to take such news with a pinch of salt as nobody in their right minds would be idiot enough to buy such a company, not that Malaysia’s market is huge. The people who arranged for the news to be out to the public already made tons of money when the stock price was bid-up then (by speculators). I’ve written too many articles on this bleeding company that I’m getting sick and tired with the same losses reported and the same excuses given by the top government officers in turnaround the company.

If the premier is serious that Proton’s management has to do “whatever” is necessary to stop the bleeds, why the talks with Volkswagen could fails at the first place? The government holds the majority 43 percent and with a nod, the deal would be signed. There’re more than the issue of candidates, it has to do with the coming general election of which the votes from the Malay-ethnic who formed the largest beneficiaries from the whole Proton’s saga need to be taken into consideration. Hence, expect the next round of talk to fail again and don’t be surprise if the government started to invites other automobile players from Yugoslavia, Korea, Czechoslovakia and others with the intention to buy times.
# TIP: Avoid this stock at all cost unless you prepare to take the beat. The stock is supported at current price mainly due to Khazanah Nasional’s majority stake.
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