VW and Sime Darby to rescue Proton?

That is according to the Edge Financial Daily, picked up by Reuters here. VW is to take up a 51% stake in a new company, with remaining 49% owned by currently listed Proton. VW will have management control as well in the new entity which will be injected with Proton's current manufacturing, R&D, and engineering assets. Khazanah's current 43% stake in Proton will be bought by Sime Darby. So, after all the flip flop (what is new?) on making a decision on Proton, I hope this will bring final closure to the whole sorry story. Let's face it, Proton without a foreign carmaker who has proven itself to turn-around failing brands will be a dead duck some time this time next year. The estimated RM500mil in cash that they have will last them at most 1 year if they continue to see dropping sales. Already there were talks among certain quarters on a dreaded taxpayer bailout, which is not unlikely considering that to cut down on their dealer network they have been asking the government to pay RM300,000 each to dealers asked to close.

For all that misplaced talk about national pride, it is no pride to waste taxpayers' money on propping up a doomed company. A company which all the while has profited immensely from selling poor quality products to customers who are forced to have limited choices due to the government's protectionist policies. Whereas the other national car company took the initial opportunity given to build up their capabilities in churning out desirable, affordable, and good quality cars, Proton has chosen to continue selling 20-year old cars, churn out models which appeal to a very niche segment of car buyers, as well as not being able to come up with new models fast enough. Worse still, all attempts to carve a market for themselves outside of Malaysia were failures due to pricing, branding, and just lousy products. It is inevitable considering the global car market and industry today that Proton will fail as an independent car manufacturer.

Instead of complete closure of the company and factories causing a ripple effect down the supply chain, selling it off to VW with full management, engineering and production control will be a much better decision. That way at least jobs could still be kept, and good suppliers will still be around. Moreover, 49% of the new company to be created will still be in Malaysian hands and any turnaround of Proton will be beneficial to the Malaysian shareholders as well. Just as in the Skoda brand, nobody would question Proton as a Malaysian brand even if it is very likely that they will be variants based on VW platforms. At the end of the day it will be a win-win-win situation for all. Having a smaller piece of a much bigger pie will always be better than having a big piece of a tiny, or worse rotten and inedible, pie. I, for one, will be happy if Proton could survive and thrive with this new arrangement, albeit with a difference in character.