KUALA LUMPUR, Malaysia (AP) -- Malaysia's leader said that national carmaker Proton, criticized for shoddy workmanship and poor after-sales service, should tie-up with a strong foreign partner in a joint venture to remain competitive.
The comments by Prime Minister Abdullah Ahmad Badawi came amid news Wednesday that Proton has been sued by its former Chinese joint-venture partner, Goldstar Heavy Industrial Co. Ltd., for 1 billion yuan ($146 million) in compensation for breach of contract.
Abdullah indicated in an interview with The Associated Press that Proton should be willing to give majority control to a partner in a joint venture if necessary but refused to be drawn on specifics.
Asked if a foreign partner can hold a majority 51 percent stake, he said: "It doesn't matter as long as Proton, the mother company, is entirely ours."
"This (joint venture) is our investment in collaboration with another company. We will (find) what is the best arrangement which will be entirely commercial," he said.
Pressured by dwindling sales and growing competition as Malaysia liberalizes its auto market, state-owned Proton began searching for a new foreign partner after Japan's Mitsubishi Motors Corp. bailed out as a major shareholder in 2004 due to its own financial problems.
Alliance talks with Germany's Volkswagen AG and General Motors Corp. failed due to the government's reluctance to cede control of Proton -- seen as a national icon.
Abdullah declined to comment on speculation that Proton has revived alliance talks with Volkswagen, saying it's up to Proton to find the best suitor before it reports to the government.
Some analysts have warned it will be tough for Proton to penetrate global markets or gain new technology without a strong foreign partner, particularly amid a global economic slump.
Proton improved its domestic market share to 33 percent so far this year, from 24 percent last year, after introducing several cheap models but its exports remained weak.
The company has said it aims to boost sales by selling within China through a tie-up with Jinhua Youngman Automobile Manufacturing Co. Ltd.
Proton said Wednesday it had terminated its contract with Goldstar after the Chinese firm failed to get a manufacturing license over a period of three years.
"Goldstar's failure has frustrated Proton's initiatives to get the joint venture to start producing cars in China," the company said in a statement.
The termination of the contract led to the $146 million compensation suit filed by Goldstar in China last month.
Proton said it had begun arbitration proceedings against Goldstar and also obtained an anti-suit injunction in Singapore to prevent the Chinese firm from starting or continuing with any other court proceedings.
The recent legal suit by Goldstar is violating the agreed arbitration process and the anti-suit injunction, it said.
Associated Press writer Vjiay Joshi contributed to this report.
