Outside Looking In: Proton-VW Talks Fail

Troubled Malaysian automaker Proton faces an increasingly uncertain future, as Volkswagen announced Thursday night that it won’t be the company’s rescuer.

Proton had been engaged in discussions with the Germans, who had been looking to take an equity stake in the company. As the story goes, the Malaysian government (which owes 43-percent of Proton via its Khazanah Nasional Bhd state investment firm) stepped in and said that VW’s terms weren’t acceptable.

Of course, the automaker is free to pursue other tie-ups (General Motors remains a possibility), but with the deregulation of Malaysia’s car industry and the resultant increase in competition, Proton will likely continue to hemorrhage money until it can find a partner that will help modernize its lineup.

Proton was established in 1983 as part of a joint-venture with Mitsubishi, but that relationship was severed in 2004, from which point on Proton has floundered. Once its nation’s largest automaker with a market share in excess of 60 percent (as recently as 2002), it had slipped to just 32 percent by 2006, losing its sales crown to Perodua, which is now in bed with Toyota.

For enthusiasts in non-Proton markets, there’s still reason for concern, as lightweight carmaker Lotus’ future is also at issue in this deal. Well over half of the iconic British company has been owned by Proton since 1996, and a dim future for Proton isn’t likely to help the fortune of Colin Chapman’s disciples.

+ Forbes: VW Slams Door On Proton