Perodua Rejects Proton Merger

Malaysia's biggest automaker rejected government proposal for it to combine with rival Proton, but siad the two could deepen their technical alliance.

KUALA LUMPUR, Malaysia (AP) -- Malaysia's biggest automaker Perodua said Wednesday it expects sales to rise 3.4 percent this year with the launch of a new compact car and rejected a government proposal for it to combine with domestic rival Proton.

Managing director Aminar Rashid Salleh said Perodua, which is partly owned by Daihatsu Motor Corp., has told a government panel recently that there were no merits to a tie-up with state-owned Proton but the two companies could deepen their technical alliance.

The government has suggested a consolidation between the two players, who jointly control about 60 percent of Southeast Asia's largest passenger car market, to boost the auto sector.

"We don't see the benefits (of a merger) but we can enhance and improve further on our technical collaboration," Aminar told reporters. Perodua currently supplies some car parts to Proton which could be expanded further and the two could also join up to purchase raw materials to bring down costs, he said.

Proton, whose fortunes have dwindled due to greater competition, has not been able to find a foreign partner, partly due to the government's reluctance to cede control over the national icon.

In contrast, Perodua, which was set up as second national car maker in 1993, a decade after Proton, flourished because of its strong ties with Daihatsu which owns a controlling 51 percent stake in Perodua's manufacturing outfit. Malaysian firms however, retain a majority stake in Perodua's holding company.

Proton officials couldn't be immediately reached for comment but the company is reported to favor a tie-up.

Aminar said April's sales have dipped as Perodua was forced to cut production by 11 percent in the second quarter because it couldn't obtain Japanese imports of engine components and accessories. Japanese plants that supply them were damaged by the March 11 earthquake or hampered by power outages.

However, he said parts supplies are expected to normalize earlier than expected by July, as vendors were already getting components from other markets.

Perodua will launch a new compact car before September that will be a major boost to sales and help it retain its market leadership, he said. Production will then be ramped up to meet any shortfall, he said.

"Outside of Japan, Malaysia is the biggest market for Daihatsu cars. We are still upbeat on meeting our sales target of 195,000 units this year. We are confident that with the launch of the new model, we will be able to recover quickly," Aminar said.

Last year, Perodua sold 188,600 vehicles to secure a 31 percent market share but this fell to 29 percent in the first quarter. Officials said the new model is expected to replace Perodua's top selling Myvi compact car launched in 2005.

Aminar announced plans by Perodua and Daihatsu to invest up to 250 million ringgit ($84 millio) to set up a factory in Malaysia to produce electronic automatic transmission parts for local and export markets. He said details including equity and plant location are being finalized, but construction is expected to begin in the fourth quarter and production a year later.

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