Proton courts Peugeot

PEUGEOT is the latest car-maker to be involved in talks with Malaysia’s Proton Holdings Bhd car company.

Proton managing director Syed Zainal Abidin Syed Mohamed Tahir has said that talks with Europe’s second-largest car-maker were "quite advanced".

He recently told an international conference on automotive manufacturing that the company’s recovery plan hinged on the strategic alliance.

Proton and PSA are believed to be investigating a co-operative agreement similar to the one Proton had been seeking with German giant Volkswagen.

Early this year, VW scrapped talks with Proton over a strategic partnership but Proton is still expected to go ahead with assembling some smaller VW vehicles for South-East Asia.

Proton had rejected VW overtures to have a substantial stake in the Malaysian company, which is 43 per cent owned by state investment arm Khazanah Nasional.

Analysts say Proton needs a partner to expand its export push and also improve quality.

Proton Cars Australia managing director, John Startari, who has just returned from Malaysia, confirmed the PSA talks but said no firm plans had been made.

Apart from PSA, Proton has also been widely reported as investigating a link up with Chinese car-maker Chery to sell and distribute vehicles in each country as well as throughout South-East Asia.

In a statement to the Malaysian Stock Exchange several weeks ago Proton said it "inked" an agreement with Chery and its Malaysian distributor Alado Corp to undertake a three-month joint feasibility study to "evaluate possibilities and opportunities for... providing assembly services and distribution of vehicles".

The Malaysian car-maker is also casting its net wider to India, seeking a partner there to lift exports.

Proton and PSA are believed to be looking at a broader alliance than the one the Malaysian car-maker has with Mitsubishi Motors Corp.

At present MMC supplies some components, including engine and transmissions, to Proton for vehicles such as the Wira, Satria and Perdana but earlier this year they agreed to broaden their ties.

Proton’s market share in Malaysia has taken a beating in recent years as tariffs are reduced, attracting better-built Japanese rivals.

If the PSA-Proton deal goes ahead, both car-makers could work on joint-vehicle platform development and sourcing of components.

PSA already has a pact with Fiat for commercial vehicles, Ford Motor Co for engines and with Mitsubishi Motors Corp for the Outlander.

Before the government started lowering tariffs on foreign cars under ASEAN it had led a highly protected local car industry designed to encourage Malaysians to buy Malaysian.

Proton has just reported a fourth-quarter net profit in line with expectations but its outlook remains bleak.

The company says increasing competition, dampened consumer demand at home and increasing energy costs are impacting on its operations, according to Automotive News.

Its full-year net profit was $US13 million, barely a tenth of its 2004/05 result but roughly in line with market estimates.

Proton expects to build 190,000 vehicles this year and 34,000 cars earmarked for export, however its factories have plenty of spare capacity, which is an ideal lure for foreign car-companies.

Meanwhile, Proton Cars Australia is gearing up for the launch of the new three-door Satria later this year.

Mr Startari said the cars had been homologated for Australia and final specifications had been signed off with a scheduled production start for Australian cars set for October.

Mr Startari would not talk about engines or equipment levels for the car but said the Savvy has set a benchmark for Proton’s future.

With Satria "we want to be known as a high-spec affordable brand", he said.

Malaysian reports have suggested the Satria will have a choice of either 1.3-litre or 1.6-litre four cylinder engines, Lotus-tuned suspension and a high degree of standard equipment.

A turbocharged GTi version is also in the wings.