[ UPDATE: The talks between Proton and Volkswagen have been called off, but why? Click here for the inside scoop. ]

The verdict is out – Proton and Volkswagen are not tying up together in a partnership that involves stake transfer.

Second Finance Minister Tan Sri Nor Mohamed Yakcop says the earlier plan for Proton to have a foreign strategic partner was no longer applicable as circumstances have changed.

Proton has shown clear improvement in the recent months, including significantly improved sales figures and a popular new model. It will also be launching the new BLM soon, the long awaited People’s Car replacement for the ageing Proton Saga, which despite its age has also become a sales success in recent months thanks to the new Merdeka promotion pricing. The new Saga will come in 2008. There is also an MPV in the works for a 2009 launch.

Consumer confidence in Proton have also been slowly restored, though Proton has a long way to go in that area. Other improvements that the government noted include improving overseas ventures – Proton has had dealings with Iran and China recently. It exported 5,000 Wajas to Iran with plans for GEN2 assembly there, and negotiated a rebadging deal with China’s Jinhua Youngman for them to sell GEN2 cars there under the Europestar badge.

Tan Sri Nor Mohamed Yakcop says Volkswagen did not walk away from the negotiation, and there was no breakdown in talks. Volkswagen was disappointed in the government (Khazanah)’s decision to pull out of the talks, but respected its decision.

The government does not rule out the possibility of future strategic alliances with foreign partners, but only at a more appropriate time and when Proton is in a stronger negotiating position. And from what the public can see at least, Proton looks like it is on its way to that position.

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