Volkswagen BOSS to visit Malaysia to conclude deal

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Sep 23 2007
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The news was actually out (kinda like leaked) that Germany’s Volkswagen (FRA: VOW) already agreed to take a stake in Malaysian loss-making car-maker Proton Holdings Bhd (KLSE: PROTON, stock-code 5304) but with some conditions attached. Knowing that Malaysia’s GLCs (government-linked-companies) are mostly tricky when comes to question of management control, Volkswagen earlier suggested that it would take 20 precent stake initially with the right to raise it to 50 percent majority stake in 5-years period.

Secondly – Volkswagen wants Malaysian government to clean up all the debts (or shits) accumulated by Proton. It makes business sense as Volkswagen is suppose to start its plan of putting everything on track to push the Proton out of red once the green light is given. That’s the plan and Volkswagen has no intention of studying and wasting time trying to clear the debts due to the previous weak management of Proton.

Volkswagen Boss offer to ProtonHence the third and most important condition is to have all (or majority) of existing management team pulled out from the board of Proton. As suggested by Volkswagen, it will have only 20 percent stake initially so the board might still consists of majority Proton’s team. With 59% stake (including a 43 percent stake held by its investment arm, Khazanah Nasional), the government will have more representatives on boards of Proton, at least in theory, and this could create problems when Volkswagen management would like to push for some important decision.

However when the above news was out, Malaysian Prime Minister Abdullah Badawi only confirmed talks were ongoing but said there was no formal request from Volkswagen for a stake in Proton. But then it could merely due to protocol or procedure that it would not be nice for Badawi to announce something which has already been reported and known to public, the same way the first Malaysian astronaut was identified and reported by foreign news before Badawi has the honour to announce it to the country.

Badawi VW offered ProtonNevertheless, a report from Singapore which picked up the Edge business news said that Volkswagen boss Martin Winterkorn will visit Malaysia in the next few weeks to conclude a deal between the German auto giant and state-owned carmaker Proton. The visit by the Volkswagen chief executive officer this time should settle a lot of questions and uncertainties that have prolong the negotiations.

While Proton desperately needs foreign technical expertise to halt its ever continuing decline in market share, Volkswagen hopes to have a base to strengthen its presence in the Southeast Asian region. It’s a matter of who is more desperate to get out from its trouble and hence give in to the conditions set by the other party.

Proton’s stock prices should get excited by the news of the coming visit by the Volkswagen’s boss and everyone would be listening and watching the final conclusion from Badawi. Considering Abdullah Badawi’s administration is currently hit by multiple crisis and scandals such as the RM4.6 billion ringgit PKFZ scandal and the latest Judiciary Scandal, not to mention tough economic decision in raising gas price, Badawi could put the meeting with Volkswagen boss as the last priority for the time being,

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