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No foreign control of Proton
June 3, 2007

Malaysia has said it will never give up control of Proton to a foreign
firm, as it struggles to find a strategic partner for the loss-making
national car company.

Malaysia has for months been in talks with German automaker Volkswagen and
US auto giant General Motors for a tie-up that would help Proton arrest a
sharp decline in market share.

But Deputy Prime Minister Najib Razak said any potential partner had to
realise that Proton would never be allowed to fall under foreign control,
the state Bernama news agency reported.

A collaboration "must be in line with our thinking and our position,
otherwise there cannot be an agreement," Najib was quoted as saying late
Friday. "What this means is that we will not simply hand over Proton, we
have our stand that a prospective strategic partner must accept," he said.

His comments follow an apparent last-ditch attempt to forge a strategic
alliance with Volkswagen after Prime Minister Abdullah Ahmad Badawi said
Thursday said talks had been abandoned with the German carmaker.

Abdullah said Volkswagen was not keen on Proton's proposals on equity
participation, and the Malaysian firm needed to start talks with other
parties. But officials said Friday Volkswagen had requested a final round
of talks.

The wrangling came as Proton Thursday posted larger than expected net
losses of 591.36 million ringgit (174 million dollars) for the year to
March 2007.
The carmaker blamed weak sales and higher production costs for a reversal
from the previous year's profit of 46.69 million ringgit.

Najib said Proton had to take steps to turn around its fortunes. "We don't
want to see it wallowing in debt even though the environment and market
have become more competitive," he said.

The government is under intense pressure to forge a partnership for
Proton, but has so far missed two self-imposed deadlines to make a
decision. The state owns 59 percent of Proton and analysts have partly
attributed difficulties in talks over government reluctance to cede
control of a key national company into foreign hands.

Second Finance Minister Nor Mohamed Yakcop Friday said Malaysia would
decide on a partner for Proton within the next three months. AFP

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