Proton drops on end of VW, GM talks

Proton Holdings Bhd, Malaysia's state-owned carmaker, plunged to a seven-year low in Kuala Lumpur trading yesterday after the government ended alliance talks with Volkswagen AG and General Motors Corp.

Proton slumped as much as 13 percent after Malaysia's state investment unit said on Tuesday it scrapped a year of talks to give the carmaker more time to reverse five quarters of losses.

A strategic alliance can be considered later "if necessary", the government agency said in a statement.

"They don't have the resources to make it on their own," said Raymond Tang, who oversees $5.4 billion at CIMB-Principal Asset Management Bhd in Kuala Lumpur.

A turnaround now depends on the Malaysian company's ability to develop models and increase its sales in overseas markets including China, Iran and Thailand.

While sales in Malaysia for a new car rolled out in August beat company forecasts, that won't be sufficient for the 24-year-old automaker to go it alone, analysts said.

Bloomberg News

(China Daily 11/22/2007 page16)