» Proton shares drop after unsuccessful deal with Volkswagen | Volkswagen Blog | Dubautoparts

Proton shares drop after unsuccessful deal with Volkswagen

Following the discontinued negotiations of Volkswagen and Malaysia regarding the Proton car brand, shares of Proton suffered a considerable decline. As of late, the beleagered Malaysian brand fell down 58 sen to 4.38 ringgit (equivalent to 1.29 dollars), whereas the Kuala Lumpure Composite Index tumbled 0.5 percent or 6.94 points at 1,364.76.

As it goes, most analysts put the blame on the shelving of the deal that was initiated by Malaysia.

Sharifah Farah, CIMB Investment Bank Research Analyst, has this to say: “We are taken aback by the government’s decision to end talks with Volkswagen and let Proton operate without a strategic partner. We believe there is still a question mark over Proton’s long-term viability given further liberalisation of the local auto industry, the influx of new competitive models and competition from foreign carmakers.”

The unfortunate part, according to Sharifah, is that it was highly unlikely that Volkswagen will offer to restart the talks for Proton: “We see no reason for why Volkswagen would be interested in restarting talks at a later stage. Proton needs Volkswagen, rather than the reverse.”

Kelvin Goh, an analyst at CIMB, relates that Proton certainly needs a foreign ally to remain competitive in the long-term aspect, thus it was a surprise to pass up the opportunity with Volkswagen because of a mere sales increase: “We were taken aback by the government’s decision to walk away from the talks as we view the recent improvement in sales as a short-term rebound.”

On another reaction, Aishah Ahmad, Malaysian Automotive Association President, bravely let on that the governmen’s decision block Volkswagen has “nothing to do” with controversial policies intended to thin the wealth line between the Malays and the Chinese: “Volkswagen was only looking for a 20 percent equity. They were not asking for a majority stake.”

This entry was posted on Saturday, November 24th, 2007 at 3:31 am and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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