KUALA LUMPUR -- Volkswagen and other carmakers would be willing to buy Malaysia's Proton but the state-controlled carmaker fears foreign control, its adviser Mahathir Mohamad said on Tuesday.
Analysts say a foreign partner is pivotal to Proton's fortunes when Malaysia opens its long-sheltered auto market to foreign competition by 2008.
Proton, a brainchild of former Prime Minister Mahathir, became Malaysia's dominant automaker as part of a government industrialization drive that included imposing import tariffs of more than 300 percent on foreign cars.
Volkswagen last year agreed to a partnership deal with Proton that aimed to boost its presence in Southeast Asian markets. The deal did not involve taking equity stakes.
"If we want to, we can sell more than 50 percent to Volkswagen. They are quite willing, I think, to buy even 100 percent," Mahathir told a news conference.
"There are many other companies which would gladly buy 100 percent of Proton. Our fear, of course, is if they buy 100 percent, they might close the production of our national car and just assemble their cars."
In March, Volkswagen said it would start assembling its Passat mid-sized model in Malaysia this year with Proton and add the subcompact Fox model in 2006.
In an interview in early June with German daily Frankfurter Allgemeine Zeitung (FAZ), VW Chief Executive Bernd Pischetsrieder said the company would consider taking a stake in Proton only once VW finishes its plans for the coming five to seven years.
When asked whether it would use its own treasury shares to pay for a stake in Proton, he replied: "I don't really think so."
A spokesman for Volkswagen said: "These statements in the FAZ are still valid." He did not comment further on the matter.
MARKET SHARE SLUMP
Volkswagen said in March that the auto market in the Association of Southeast Asia Nations (ASEAN) trade region should grow by more than two-thirds, or 1 million units, to 2.4 million vehicles a year by 2015.
Malaysia is Southeast Asia's biggest auto market after Thailand and the region's top passenger car market, with sales of 380,568 units last year.
Proton's market share has dropped to 44 percent from more than two-thirds amid competition from low-priced cars made by Honda Motor Co. Ltd. and Toyota Motor Corp.
Malaysia has promised to cut auto tariffs to between zero and 5 percent by 2008 under regional free trade rules.
State investment arm Khazanah Nasional holds a 42.7 percent stake in Proton, and state oil and gas firm Petronas has an 8.8 percent stake.
Mahathir said Khazanah would sell some of its stake by the end of the year, when a stock exchange rule exemption on its stake expires.
Khazanah is currently exempt from a regulation requiring a shareholder owning more than one-third of a listed firm to make an offer to other shareholders.
Mahathir also said Khazanah wanted to bring changes to Proton, including the role of Chief Executive Tengku Mahaleel Tengku Ariff, who has been the focus of speculation following a newspaper interview that included remarks critical of the government.
"As far as I know he's not been asked to leave," Mahathir said, but added that Khazanah may make some changes, such as ending a practice whereby the Proton chief also headed some subsidiaries.
"Of course, any change causes a lot of problems. I don't know whether the changes are justified or not. I am looking into it. Some of the changes must involve the CEO as well," he said.
Proton Chairman Abu Hassan Kendut resigned in February after a media report that he felt Mahathir was interfering too much in the company's affairs.