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Last Updated: Friday, 10 November 2006, 07:13 GMT
Proton talks with foreign firms
Proton Gen-2 car
Proton faces increased competition from Japanese and Korean rivals
Shares in Malaysia's state-run carmaker Proton have climbed 20% after it was revealed it was in talks to sell a stake to a foreign car firm.

Peugeot and Volkswagen are among those it has held discussions with, a government minister said.

In January Volkswagen dropped plans to invest in Proton after it refused to relinquish managerial control.

But the government said that letting an outside firm take a 51% stake in manufacturing operations was possible.

This would allow Proton to manage sales and distribution, while another carmaker uses its expertise on the assembly lines.

Firms such as Volkswagen are looking to tap into the growing Asian market, while Proton wants access to new technology and help to protect its market share.

It is facing stiff competition from rival Asia carmakers that have been eating into its market share.

Malaysia's Second Minister of Finance Nor Mohamed Yakcop said government would make a decision on a tie-up within three months.

"We will do whatever it takes to make Proton viable. If we need to give them significant equity, we will give them significant equity." he said.

Proton hammered as deal collapses
13 Jan 06 |  Business
Volkswagen 'close to Proton deal'
29 Jul 05 |  Business
Ex-Malaysia PM becomes Proton's adviser
11 May 04 |  Asia-Pacific

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