Proton is the state-owned carmaker of Malaysia. It is also losing money at a rapid rate, needs an infusion of capital, and needs some serious help with technology.
Sounds like a deal Cerberus would probably jump at, doesn’t it?
Actually, it was General Motors and Volkswagen that were interested. Proton, in addition to the home market, is a potential entre into the burgeoning market in China. Though it does not currently sell cars in China, the line it does sell in Malaysia is very inexpensively priced, and could potentially target a low priced market in China.
Proton had been in talks with both companies about a strategic alliance.
But, no more. Talks have terminated, with no deal having been reached with either automaker. Following release of that information, Proton shares took their single biggest one day share price hit, dropping a total of 39% this year.
Nonetheless, Rob Leggat, spokesman for GM, said General Motors remains interested in Proton. 
Meantime, VW has decided to forge ahead without Proton, and will set up an expanded sales and service network for their products within Malaysia.
Proton owns Lotus, but it has been getting hammered in its own home market. The government of Malaysia, which owns 40% of the company, has refused to consider injecting new money into the company and has, instead, expressed confidence in the company’s management.
That General Motors remains interested in the company suggests that GM sees it as an opportunity, provided that it gets control. Absent an alliance with an outside carmaker, investment experts in Malaysia do not believe Proton has a future. But an earlier agreement in principle with VW fell apart over the issue of control, and there appears to be little chance that Proton will reach a deal with any carmaker as long as long as the company is unwilling, or unable to cede control to the outsider. In the meantime, in less than two months, Proton loses what remains of the tariff protections that once made its products substantially less expensive than that of competitors.
General Motors continued interest, however, appears to be geared to keeping its foot in the door, in the expectation that eventually the company will come around to its way of thinking. That GM continues interested in Proton also reflects the continued emphasis at General Motors on developing a substantial presence in developing markets, such as China. However, the impetus for a Proton alliance, from GM’s point of view, is probably more aimed at India than at China.

What do you think?


tango  (372) posted on 11.23.2007

This would be complicated either way. Protons are built with a very high percentage of Mitsubishi parts. I wouldn’t even want to be the technicians having to deal with the typical VW issues. I think GM would be a better bet. Lotus uses Toyota engines in their current cars (the 1.8L 2NZ) as does GM in the Pontiac Vibe.

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