VW scraps Proton tie-up

VOLKSWAGEN has scrapped plans to co-operate with Malaysia’s state-controlled Proton Holdings Bhd to build and sell VW brand cars, according to Reuters and Automotive News.

"We had a very specific idea how we wanted to proceed there. Unfortunately the Malaysian government (Malaysia’s state investment arm), Khazanah and Proton had different ideas. Therefore what we wanted in the co-operation with Proton will not materialise," told investors at a meeting in the United States last week.

In October 2004, the Wolfsburg-based car-maker said it had signed an agreement for a long-term strategic partnership with Proton that would help it enter the growing South-East Asian car markets without significant investments.

As a first step, VW and Proton agreed to assemble two VW models, the Passat and small Fox, from knock-down kits with some of the parts to be procured in Malaysia to help build up the domestic auto industry.

Although VW had then said it had no plans at the time to buy into the Malaysian car-maker, shares in Proton received substantial support due to repeated reports that Volkswagen had entered into negotiations to buy a stake in the company.

Mr Pischetsrieder said VW was still in talks with Proton but there were no more benefits to be attained out of the partnership for Volkswagen.

"What we are investigating now is whether in a few isolated projects we can support Proton - and I'd like to put the emphasis on exactly that word, to support Proton - and not to have any joint programs or joint ventures or so but to support Proton," he said.