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Proton and Volkswagen deal in trouble

Viknesh Vijayenthiran

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Proton and Volkswagen deal in trouble

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Update: PSA Peugeot Citroën has announced that it's no longer interesting in partnering with Proton and has discontinued any ongoing talks with the Malaysian carmaker.

The ongoing talks between Proton and Volkswagen are said to be going badly despite officials from both companies meeting on several occasions. The Edge business newspaper reports that a basic agreement has yet to be reached and the mood of VW of late has been “less keen.” Recent delays have also been raising doubts whether the proposed deal would even go ahead.

VW has already signed an agreement of intent to buy a 51% stake in the manufacturing arm of Malaysia’s state-owned Proton. A move that would allow it to build the Passat sedan in Malaysia and export it to Japan without any tariffs because of the free trade deal that exists between the two countries. Malaysia is also working on free trade agreements with Australia and the US, and the approval of these would allow VW to significantly increase manufacturing capacity in the country.

According to industry sources, General Motors is likely to make its own bid as well as PSA Peugeot Citroen if the VW deal fails. There are even three Malaysian firms interested in buying a stake in Proton.