Finally a VW-Proton Partnership? image

Volkswagen AG (VOW) is planning to expand its production in Malaysia and has already sent senior executives to review Proton Holdings Bhd’s operations for a potential future partnership.

This decision came after DRB-Hicom Bhd., VW’s partner, agreed in January to buy 43% of the Malaysian company, gaining control over two Malaysian car plants which produce 350,000 cars per year. The VW senior executives are not considering whether the plants are suitable and equipped to produce VW models, which will target the Southeast Asian markets.

“Volkswagen (VOW3) is expanding because they have yet to have a big presence in Southeast Asia,” Ahmad Maghfur Usman, an analyst at OSK Holdings Bhd., said by phone in Kuala Lumpur. “They can start growing their market share in countries like Indonesia and Thailand.”

The German company has some failed attempts in the past concerning a partnership with Proton. In November 2007 the agreement failed after 12 months of negotiations and then in June 2010, when VW called off the cooperation. Hopefully, this time both parts will close a deal.

“Volkswagen continually examines local market opportunities,” the company said in an e-mailed reply today. “The Malaysian market in general is of high importance for the Volkswagen Group.”