Malaysia’s Proton to sign memorandum of intent with Volkswagen soon

KUALA LUMPUR, Nov. 15, 2007 (Thomson Financial delivered by Newstex) — A deal has been struck to forge a partnership between Malaysian national carmaker Proton Holdings Bhd (OOTC:POHDF) and Germany’s Volkswagen AG, the Edge Financial Daily reported on Friday.

The negotiations between the Malaysian government and Volkswagen has been concluded and a memorandum of intent (MOI) will be signed soon, the newspaper said, citing unnamed sources.

The MOI is expected to set the stage for further due diligence and collaboration between the two parties, the sources said.

The collaboration is likely to be in the area of manufacturing, marketing and distribution. It is intended to ensure that the foreign partner would be committed toward making Proton an internationally competitive carmaker.

Apart from Volkswagen, General Motors Corp (NYSE:GM) is also in the list of possible strategic partners, the sources said.

‘The foreign partner must have scalability, research and development capabilities to produce new models and market access … these are the things Proton lacks,’ the sources said.

Among the features of the deal being considered is that the brand name, Proton, should be maintained even under the strategic tie-up, the report said.

Early this month, Malaysia’s second finance minister Nor Mohamed Yakcop said he is confident that a deal between Proton and Volkswagen will be reached by the end-2007 deadline.

The Malaysian government’s investment arm, Khazanah, owns 43 percent of Proton.

Proton needs foreign technical expertise to halt a sharp decline in its market share and end a stream of losses, including a 46.75 million ringgit net loss for the first quarter to June.

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