Shares in Malaysia’s national car maker Proton fell to their lowest level in seven years on Wednesday after the government said it had stopped talking strategic alliances with Volkswagen and General Motors, a local report said.
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According to the Associated Press (AP), the announcement caught industry observers by surprise on Tuesday and brought ratings downgrades as many analysts questioned the long-term viability of the beleaguered car maker.
According to the news agency, Proton’s shares plunged as much as 19.4% to 3.98 ringgit during Wednesday’s trading – their lowest level since October 2000 – and ended the day at 4.02 ringgit while RHB Research downgraded the stock to ‘underperform’ from ‘trading buy’ and CIMB Research lowered its target price for the stock to 3.50 ringgit from 4.52 ringgit.
The Associated Press said Malaysia’s state investment arm Khazanah Nasional, which owns a controlling stake in Proton, said in a statement late on Tuesday that the company has “discontinued negotiations” on possible alliances with Volkswagen and GM.
This ‘will they, won’t they?’ saga has now dragged on for most of this year and just-auto has carried numerous reports of Malysian government officials desperately trying to stablish some sort of link with a major automaker, mainly Volkswagen and GM (PSA has also been mentioned) to prop up ailing Proton.
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By GlobalDataThe ‘national car maker’ was established initially in the 1980s building lightly updated Mitsubishi Colt/Lancer models with Mitsubishi engines made locally under licence and has gradually evolved, after more recently taking over Lotus, with its extensive in-house design ability, into developing its own models.
Proton was originally protected by high tariffs on rival imported models but has failed to cope with increasing competition, firstly from a second government-authorised ‘national car maker’, Perodua (which uses Daihatsu technology under licence) and, more recently, reduced import tariffs as the Malaysian government has been forced to open up its auto market as part of Asian regional trade agreements.
The Associated Press said on Wednesday that money-losing Proton had been in talks with the global automakers about partnerships to help reverse its fortunes but Khazanah Nasional said Malaysian officials have recently noted positive developments at Proton, including improvements in domestic sales and exports.
Proton reported a loss of 591m ringgit ($US169m; EUR124m) in the 2007 financial year, according to AP.
The report also cited government officials as saying, late on Tuesday, that the company is introducing new models to raise its domestic market share from its current 31% [way down from its once-heady days of market domination when protected from import competition by high tariffs].
The Associated Press noted that Proton had long thrived in a protected environment, with high duties on imported vehicles forcing many Malaysians to buy its cars and, as duties were slowly lowered in line with a regional trade agreement, that more Malaysians were buying imported vehicles.
Proton, Malaysia, offer VW little
