Peugeot-Citroen says it will not pursue talks with Malaysia's Proton

PSA Peugeot-Citroen said Monday it has decided to break off discussions with Malaysian car maker Proton Holdings BHD about possible industrial collaboration.

Executives from Peugeot-Citroen and state-controlled Proton had been reviewing possible areas for cooperation since September. A deal with Proton would have given the French car maker an industrial base in Malaysia that could have been used to develop sales throughout southeast Asia.

But "after an in-depth study of the automobile industry situation and the economic conditions for production in a partnership with Proton, it became apparent that the right conditions for a successful project weren't in place," Peugeot-Citroen said in a statement.

While the French company was interested in industrial collaboration, the Malaysian government would have preferred a capital investment by Peugeot-Citroen in Proton.

Proton has been talking to other auto makers about cooperation, notably Germany's Volkswagen AG. But according to a report in the Malaysian weekly The Edge, talks between Proton's 42.7 percent shareholder Khazanah and Volkswagen were not going well either, reports AP.

Quoting unnamed sources, the report said Volkswagen may be questioning some conditions imposed by Proton's major shareholders, but gave no details. The publication added that, if the alliance with Volkswagen does not pan out, U.S.-based General Motors Corp. could become the partner of choice.

Malaysia's deputy Finance Minister Nor Mohamed Yakcop said last week that the government would make an announcement on Proton's strategic partner later this month.

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