Malaysia's Proton Says Volkswagen Talks Dissolve

KUALA LUMPUR, Malaysia (AP) -- Malaysian national carmaker Proton said Monday that Volkswagen AG will not collaborate with it because the German automaker "has other priorities," the second time talks between the two have failed, sending Proton's shares down more than 5 percent.

Proton said in a statement that Volkswagen "would be an interesting collaboration partner," but Volkswagen has declined during preliminary talks to partner up with Proton.

"Volkswagen confirmed that it currently has other priorities," the statement said. It did not elaborate, and a spokeswoman could not immediately give further details.

Proton said it would continue to work with other partners such as Mitsubishi and would aim to expand domestically and regionally.

The news dragged down Proton shares, which dived 5.3 percent at midday to 4.48 ringgit ($1.35). Analysts said the carmaker has to switch gears to intensify its search for a new partner if it wants to survive in the long run.

"Proton's need for a strategic partner to leverage on to enter the global export market is crucial at this juncture before Proton gets further left behind by the competition," OSK Research said in a report.

Proton's first round of alliance talks with Volkswagen collapsed in 2007 after the government insisted on maintaining control over the national corporate icon, making it difficult for Proton to seal any meaningful partnership.

Proton returned to the black for the financial year ended March with a profit of 239 million ringgit ($72 million), from a loss of 302 million ringgit ($91 million) the previous year.

Revenue for the full year surged 27 percent to 8.2 billion ringgit ($2.5 billion) as Proton expanded its domestic market share to 28 percent from 26 percent the previous year. Its Chairman Mohamad Nadzmi Mohamad Salleh has said Proton has to focus on ramping up exports for its long-term survival.

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