Honda bid for Proton revival

2012-10-31 08:51

KUALA LUMPUR, Malaysia - Japanese automaker Honda has agreed to a co-operative partnership with Malaysia's Proton.

In a statement from the Malaysian stock exchange, Proton's parent DRB-Hicom said the two companies would discuss collaboration in "technology enhancement, product line-up, platform and facilities-sharing".

"This collaboration will provide a positive effect on Proton and the DRB-Hicom Group in the long run," the statement added.


A Honda spokesperson said the companies had agreed to seek "possible collaboration" but no specific steps had been decided.

Proton was formed in 1983 as part of a plan to jump-start a Malaysian national industrialisation programme. It has suffered from weak sales and a reputation for unimaginative models and poor quality while struggling to stay competitive and enter global markets.

Early in 2012 DRB-Hicom, a leading car distributor and importer, bought state investment arm Khazanah Nasional's stake in Proton.
Khazanah said it sold as part of an attempt to increase the automaker's prospects amid growing competition from Japanese, European and Korean automakers in Malaysia.


Honda, Japan's third-largest vehicle manufacturer, has had troubles of its own. It recently cut its sales target in China, the world's largest auto market, as consumers shunned Japanese brands due to a territorial row between the two Asian powers over a group of small islands.

The statement to the Malaysian stock exchange said the agreement with "a strong and renowned global automotive player such as Honda Motor" would provide growth opportunities for Proton.

The partnership will not involve an equity stake. Malaysian brokerTA Securities said the collaboration would have limited benefits for Proton.


TA Securities said: "At this juncture, without Honda taking equity in Proton, we see little value added to Proton in terms of technology transfer and development of new products via this collaboration."

DRB-Hicom assembles Honda vehicles at its plant in Malaysia.

Previous negotiations to sell stakes in Proton to VW and General Motors fell apart because the Malaysian government's wanted to be the majority owner.

Proton also owns loss-making British automaker Lotus.