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(Updates with closing share price in eighth paragraph.)
Dec. 8 (Bloomberg) -- General Motors Co. has begun talks with Proton Holdings Bhd., Malaysia’s biggest automaker, to form a manufacturing venture in the Southeast Asian country, according to two people familiar with the matter.
The discussions revive negotiations that were scrapped in 2007, said the people, who asked not to be identified because the talks are confidential. The talks are preliminary and may not lead to an agreement, they said.
An accord would help Detroit-based GM expand manufacturing of cars for Southeast Asia beyond Thailand, which is reeling from its worst floods in almost 70 years. A deal may give Proton, which has held unsuccessful alliance talks with Volkswagen AG and Peugeot SA, access to GM technology that could help it boost exports.
“What Proton has to offer is immediate availability of production capacity,” said Alexander Chia, an analyst at RHB Capital Bhd. in Kuala Lumpur. “GM has all its Southeast Asia interests in Thailand right now and could be looking to spread risk and expand into other markets.”
Chia upgraded Proton to “trading buy” and increased its so-called fair value to 5 ringgit from 2.90 ringgit on Dec. 5.
Klaus-Peter Martin, a GM spokesman in Detroit, declined to comment. Izad Raya, head of group communications at Proton, which owns sports-car maker Lotus Group International Ltd., said the company doesn’t comment on speculation.
No Stake Purchase
GM isn’t interested in buying the controlling 43 percent stake in Proton held by Malaysian sovereign wealth fund Khazanah Nasional Bhd., the people said.
Proton shares jumped 45 percent over the two days to Dec. 5 after the Edge reported the state-owned asset manager was preparing to auction its holdings. The stock gained as much as 4.2 percent today and was up 0.3 percent at 4.05 ringgit at close of trade in Kuala Lumpur, while the benchmark FTSE Bursa Malaysia KLCI Index dropped 0.7 percent.
The Malaysian government, which controls Proton through Khazanah, has been seeking a partner for the carmaker since it ended an alliance with Mitsubishi Motors Corp. in 2004.
Protons, driven by taxi drivers across Malaysia, are among the cheapest cars sold in the country. The carmaker was set up in 1983 by then-Prime Minister Mahathir Mohamad.
Auto and property group DRB-Hicom Bhd., Naza Group and Proton chairman Mohd Nadzmi Mohd Salleh have submitted separate bids to Khazanah for Proton, Malaysia’s New Straits Times newspaper reported this week, without saying where it obtained the information.
DRB may make an offer with Volkswagen, the Star newspaper reported today, citing an unnamed person familiar with the matter. It already assembles vehicles for companies including Daimler AG’s Mercedes-Benz and Honda Motor Co. and signed an agreement last year to start manufacturing Volkswagen’s Passat sedans at its Pekan plant.
DRB-Hicom Managing Director Mohd Khamil Jamil was overseas and not available for comment when contacted by phone at his office in Kuala Lumpur today.
--With assistance from Barry Porter in Kuala Lumpur, Liza Lin in Shanghai and David Welch in Detroit. Editors: Chua Kong Ho, Young-Sam Cho
To contact the reporter on this story: Elffie Chew in Kuala Lumpur at firstname.lastname@example.org
To contact the editor responsible for this story: Young-Sam Cho at email@example.com