Shares of troubled Malaysian carmaker Proton closed lower Monday after rising earlier in the day following a report that it was one step closer to a deal with German auto giant Volkswagen.
Analyst said this positive news, along with a plan by the government to scrap cars 15 years and older on a voluntary basis, had fuelled investor interest in the ailing company.
“Malaysian representatives of Proton's stakeholders have inched closer to a final deal with Volkswagen,” the Edge business newspaper said Monday.
Second Finance Minister Nor Mohamed Yakcop late Monday declined to reveal fresh details following a third round of talks between the two sides.
Proton closed down 10 sen at 5.70 ringgit after hitting a high of 6.10 ringgit.
Proton and Volkswagen met for a third time in Germany recently after previous talks in Thailand and the United States.
A strategic tie-up for Proton is crucial as it needs foreign technical expertise to stem a sharp decline in market share and cut losses.
The Edge said among areas that have been agreed are that Proton will control its domestic distribution network while Volkswagen will look after international distribution.
“It is understood that Volkswagen may have agreed to pay some cash for its 51 percent equity in the new company that will own key assets of Proton,” it said.
Volkswagen will invest “a few hundred million ringgit,” to jump-start the new company, it added.
State investment arm Khazanah Nasional is the controlling shareholder in Proton, with a 42.74 percent stake. State pension fund EPF and national oil firm Petronas own 12.07 percent and 8.84 percent respectively.
Khazanah's managing director Azman Mokhtar has given the end of this year as the “overall deadline” to clinch a deal.
The early gains in Proton shares also came after reports the government had approved a programme to scrap old cars in order to help the company out by boosting demand but Nor Mohamed said this had not yet been approved.
“Possibly there are some studies on this subject but as at this point of time there is nothing … no approval,” he said.
The Edge said that the plan was designed to boost Proton's sales.
“It has been decided that those who voluntarily scrap their cars will be offered a subsidy to buy a new Proton car,” it said, adding that “the subsidy will be on a scale with a maximum of 5,000 ringgit.”
Aseambankers Research, a local reserch house, said Monday that this plan would bolster Proton's share price, “although we remain cautious of Proton's ability to deliver more than marginal profitability.”
Proton last year lost its status as Malaysia's biggest-selling automaker to homegrown rival Perodua and recently reported larger than expected net losses of 591.36 million ringgit (172.4 million dollars) for the year to March 2007.
