Hundreds of Malaysian Proton car dealers may go bust if the government fails to quickly forge a foreign alliance for the ailing national car maker, an industry group warned on Wednesday.

According to The Associated Press (AP), the Proton Edar Dealers Association said some 180 Proton dealers have accumulated losses exceeding 20m ringgit ($US5.9m) in the fiscal year ended 31 March, as Proton’s domestic market share plunged to 30% from 60% in 2002.

It reportedly expressed its disappointment that the government, which controls Proton through state investment arm Khazanah Nasional, has not been able to seal a foreign alliance with either Volkswagen or General Motors, with whom it has held extensive talks. The government says negotiations are going on, AP added.

Said Wan Ahmad Sepwan, the association president, told the Associated Press that the uncertainty over Proton’s future is causing sales to deteriorate and leaving dealers in a limbo over whether to further invest in their operations or to close shop.

“We are pleading to the government to decide immediately on the foreign partnership and future of Proton before the collapse of the dealers’ network,” he told the news agency.

According to AP, Proton has some 400 dealers nationwide, but it is seeking to consolidate the network. The association reportedly said the estimated losses were based on a study covering half the dealers.

Car dealers told the news agency the government shouldn’t fear relinquishing control of Proton, seen as a national icon, to a foreign partner.

“It’s a business decision that’s got to be made,” Farizul Baharom, the association’s secretary-general, told AP. “The automotive industry is a borderless business. You rarely see an auto company standing alone. It only makes business sense for us to merge and get the best value from our partner.”

Said Wan Ahmad reportedly said Proton dealers are selling only an average 10 cars a month, well below the 40 needed to break even.

Having a foreign partner will boost sales by improving Proton’s model lineup, raising the quality of its cars, and giving it a platform to tap the global market, he told the Associated Press. It will also bring economies of scale by increasing production at Proton’s 2bn ringgit ($US588m) plant, which is currently way underutilised, he said.

Proton is expected to lose 700million in the fiscal year ended 31 March, 2007, analysts told the news agency, compared with a net profit of 47m ringgit a year earlier.