German auto giant Volkswagen is close to forming a pact with Proton with at least an initial 20 percent stake in the loss-making Malaysian carmaker, a report said Sunday.
The Edge business weekly newspaper said Volkswagen would either take the stake in Proton or a new company into which Proton assets would be injected.
“Volkswagen is also seeking management control and will require the government to underwrite any losses at Proton for at least three years,” it said.
Malaysian officials could not be reached for comment.
The report comes after reports that Volkswagen boss Martin Winterkorn will visit Malaysia soon to conclude a deal.
The Edge said Volkswagen was waiting for a nod from the Malaysian government to sign the agreement.
Talks between Volkswagen and Proton began in October 2004.
Malaysia had already expressed optimism about securing a partnership with Volkswagen.
Malaysian Prime Minister Abdullah Ahmad Badawi said recently that Volkswagen was studying Proton for a possible strategic pact that would help save Malaysia's national carmaker.
For Proton, a deal is expected to boost efforts to reclaim the top spot in Malaysia's domestic car market and help it get a foothold in the lucrative European market.
Proton needs foreign technical expertise to halt a sharp decline in market share and halt a stream of losses, including a 46.75 million ringgit (13.40 million dollar) loss for the first quarter to June announced recently.
Volkswagen hopes to strengthen its presence in the Southeast Asian region through the partnership.
Malaysia hopes that the deal will be wrapped up by the end of the year.
