Volkswagen has reportedly pulled out of a long-mulled deal to buy Malaysian car maker Proton. Proton, which is still state owned, has suffered in recent years because of the deregulation of the Malaysian car market, which has seen other makes muscle in on its former protected turf.
The VW deal had been working away in the background for some months, and it was thought a couple of weeks ago that an announcement was imminent. But the Malaysian Prime Minister, Datuk Seri Abdullah Haji Ahmad Badawi issued a statement last week that read: "I have decided, since Volkswagen is not interested in the proposal that Proton wants in terms of equity, Proton needs to talk to other people."
VW was reckoned to be interested in Proton for its low-cost far-east manufacturing base as well as its access to burgeoning Asian markets. And that's without taking into account Proton's ownership of Lotus, whose expertise in vehicle dynamics and hybrid technology would have been very useful to VW.
Now the Germans and the Malaysians are looking elsewhere. VW may return to its South American bases in Mexico and Brazil, as it looks to produce a cheap, rear-engined car for low-cost markets (which could also be sold in Europe as a rival to the Mini and the Fiat 500). Proton is rumoured to already be having behind-the-scenes talks with Hyundai-Kia about a possible takeover.
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