Malaysia's Proton signs pact with France's Peugeot http://in.today.reuters.com/news/newsArticle.aspx?type=businessNews&storyID=2006-09-18T075516Z_01_NOOTR_RTRJONC_0_India-268084-1.xml
Mon Sep 18, 2006
KUALA LUMPUR (Reuters) - Malaysian state-controlled automaker Proton Holdings Bhd said on Monday it had signed a letter of intent with France's PSA Peugeot Citroen to study possible cooperation.
The pact, signed in Paris, and which expires on Jan. 1, 2007, will focus on areas including product development, manufacturing, quality initiatives, vendor development, contract assembly and distribution, Proton said in a statement.
Proton has been struggling to cope with greater competition, shoddy quality and falling prices as the government gradually removes protective barriers and opens the domestic market to foreign rivals under free-trade deals.
The company wants to ramp up exports, which make up a tiny proportion of sales. But most industry experts say Proton should consider selling control to a big foreign car maker to ensure its future -- something the government is opposed to -- because Proton is part of a national economic development agenda which helps redistribute more wealth and gives employment to ethnic Malays.
"The study has a number of objectives, with Proton's goal being to leverage the technological expertise of a major global automobile manufacturer in areas such as product development and quality improvement, as well as to optimise the capacity utilisation of its plants," the Malaysian firm said.
The pact is also expected to increase sales of Peugeot and Citroen vehicles in Malaysia and serve as a foundation for developing business in the Southeast Asian region, Proton added.
"The pact could lead to a strategic partnership or joint venture," a dealer with a foreign brokerage said. "It's a positive surprise for the market. I expect the share price to jump."
Proton shares were up 2 percent at 5.00 ringgit after 10 minutes of trading on Monday.
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