The Associated Press May 26, 2010, 8:32AM ET

Malaysia's Proton hints on VW tie-up, posts profit

Malaysian national carmaker Proton said it would reveal the results of talks for a possible alliance with German's Volkswagen AG next month after Wednesday announcing a profit in the quarter through March.

Proton's Chairman Mohamad Nadzmi Mohamad Salleh declined to say whether it would involve any equity tie-up or just a technical collaboration with Europe's largest carmaker. He said Proton has to focus on ramping up exports for its long-term survival, and is open to working with global carmakers to bolster economies of scale.

"We will make an announcement in one to two weeks," he told reporters.

Once the king of the road, Proton's fortunes have dwindled due to growing competition. Proton has been hunting for a foreign partner but the government's insistence on maintaining control over a national corporate icon has made it difficult for Proton to seal any meaningful partnership.

Volkswagen ended alliance talks with Proton in 2007 but later revived negotiations.

The Edge business weekly quoted sources as saying VW isn't likely to take an equity stake in Proton but would collaborate in platforms and engines. It could see a rebadging of the Passat as a replacement model for the Proton Perdana sedan, it said.

Proton on Wednesday reported a 22.8 million ($6.9 million) net profit for the March quarter, rebounding from a loss of 323 million ringgit ($97 million) in the same period last year. Revenue soared 61 percent to 2.26 billion ringgit ($682 million) in the quarter, partly due to strong sales of a new model.

This helped Proton to return to the black for the financial year ended March with a profit of 239 million ringgit ($72 million), from a loss of 302 million ringgit ($91 million) the previous year, the state-owned carmaker said.

Revenue for the full year surged 27 percent to 8.2 billion ringgit ($2.5 billion) as Proton expanded its domestic market share to 28 percent from 26 percent the previous year.

Managing Director Syed Zainal Abidin Syed Mohamed Tahir said Proton sales had risen eight percent to 148,969 vehicles in 2009, despite a two percent drop in overall vehicle sales in the country.

This was due to strong demand for its Exora multipurpose vehicle launched last year as well as the Saga and Persona sedans, he said.

Proton plans to launch a new sedan to replace other aging models in the last quarter this year and expects sales growth to be "better" this year, he said.

The Exora marks a turning point in Proton's product range, which previously focused only on passenger cars. The Exora accounts for at least a third of sales, but faces a stiff challenge after compact car maker Perodua later launched a multipurpose vehicle touted to be the cheapest in the market.


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