PROTON Saga Ending – VW as New Boss with 51%

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Jun 07 2007
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If this piece of news from EdgeDaily is true, then the saga of the Malaysian carmaker Proton Holdings Bhd (KLSE: PROTON, stock-code 5304) which has been bleeding with losses will comes to an end. It was reported that Germany’s Volkswagen (FRA : VOW) was likely to take a 51 percent stake in a new company into which would be injected Proton’s key motor assets, such as manufacturing, research and development, and engineering.

Loss-making, state-controlled Proton would hold the remaining 49 percent and continue to keep ownership of distribution arm Proton Edar. Malaysian conglomerate Sime Darby Berhad (SIME: stock-code 4197) could take over a 43 percent stake in Proton held by state investment arm Khazanah.

Details are expected to be finalised at a meeting in New York being held between representatives of Khazanah, Sime Darby, Volkswagen and the office of Malaysian Prime Minister Abdullah Ahmad Badawi. Currently key Malaysians involved in the talks are in New York as part of a roadshow organised by a Malaysian stockbroker for U.S. investors. Stock price of Proton surged 11% to RM 6.50 per share from the previous day’s closing of RM 5.85 per share as of 3:40pm Malaysia Time today.

However don’t count your chickens before they hatch since there’ve been so many flip flops as to the development on the rescue plan for Proton. Even if the news is true, that doesn’t mean the Proton status quo will change overnight. You still need time to monitor how well would the partnership be considering that one of the possibility measures to be taken would involves cost-cutting – lay-offs. Also the working culture in Proton could give Volkswagen more surprises than it expect. For all you know VW might walk off again, as I don’t think VW will starts pouring money into the ailing Proton immediately for they’re much smarter than that. In the meantime, why don’t you invest your money into other stocks while waiting for this to-be-chicken to hatch?

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