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Peugeot Citroen and Malaysia's Proton consider link

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French automaker PSA Peugeot Citroen SA said Monday it has agreed to study possible cooperation with Malaysian state-controlled auto group Proton that would give the French group a strong foothold in Asia.

Both companies have signed a letter of intent to examine possible collaboration in product development, manufacturing, quality initiatives, vendor development, contract assembly and distribution, Peugeot Citroen said in a statement.

A spokesman for the French company said there are no plans for any capitalistic ties between both companies, in line with Peugeot Citroen's strategy of working with other automotive groups on specific industrial programs.

It already co-operates in industrial projects with Fiat SPA of Italy, BMW AG of Germany, Ford Motor Co. of the U.S. and Mitsubishi Motors Co. and Toyota Motor Corp. of Japan, without any cross-shareholdings.

The feasibility study between Europe's second-largest automotive group and Proton will take several months, and if the conclusions are positive, Peugeot Citroen expects to see increased sales of its vehicles in Malaysia.

For its part, Proton wants to leverage the French automaker's technological expertise in areas like product development and quality improvement, while optimizing the capacity utilization of its assembly plants.

Proton, which is under pressure to boost its sales and return to profit by revamping its model lineup, had said that it was talking with China's Chery Automobile Co. about building and selling each other's cars in China and Southeast Asia. Proton also has a technology alliance with Mitsubishi.

Earlier this year, Proton ended talks with Volkswagen that could have given the German carmaker a stake in the Malayseian manufacturer.

Sagging sales meant that Proton posted a loss of 58.6 million ringgit, or about US$16 million, for the three months ended June 30, compared with a loss of 12.4 million ringgit a year earlier.

Last year, Peugeot Citroen linked up with Naza Group, another Malaysian automaker, in a deal that allows Naza to assemble up to 50,000 localized versions of the Peugeot 206 subcompact sedan annually and sell them under its own brand name.

Peugeot Citroen's earnings have suffered over the past two years from an aging vehicle model range, sharply higher raw material costs and fierce price competition.

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Peugeot Citroen and Malaysia's Proton consider link
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