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The Government decides not to force national carmakers to merge [26-01-2011]  
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 Perusahaan Otomobil Kedua Sdn Bhd (Perodua), which has been adamant against merging with rival Proton Holdings Bhd, would have let off a sigh of relief after news broke that the Government will not force the two national car companies to merge.

Minister of International Trade and Industry Datuk Seri Mustapa Mohamed said yesterday the Government will not force through a merger of both car companies and any solution or proposal needs to be agreed to by both stakeholders.

“We cannot force them to make a decision as there is a long spectrum. At one end is loose cooperation and at the other, a merger, which has yet to be decided,” Bernama reports Mustapa telling reporters at a signing ceremony between SME Corp Malaysia and SME Bank yesterday.

He said the Government would encourage and have talks with both companies and that he had been involved in discussions with the two companies.

“It’s a major collaboration and cooperation between Proton and Perodua and not a straight forward process,” he explained.

For months, officials at Proton have been championing a merger between Proton and Perodua but top management at Perodua have not been receptive towards the marriage between both companies.

Proton has said a consolidation of both national car companies would create scale, lower costs and make the local industry more competitive. Perodua on the other hand has said that unless the consolidation would add more than what the company’s internal plans suggested, then there was no point to merger both companies.

A study looking at the merger was commissioned by the Government and its findings were reportedly submitted to the Prime Minister and the cabinet for their consideration.

Analysts have long said the primary beneficiary of a merger between both companies would be Proton. They said the financial strength and performance favours Perodua, given its larger sales numbers and higher capacity utilisation.

“I had my doubts if a merger between both companies would be done as it was simply because of the shareholding issue,” said an analyst who covers the auto industry.

The major difference has been the nationality of the shareholders with Proton controlled by Malaysians and Perodua by the Japanese through Daihatsu Motor Co Ltd.

Furthermore, in Perodua, Daihatsu has its most profitable operations outside Japan and analysts have said that that carrot would be hard to give up.

Last year, Perodua had a 34.7% share of the domestic market and Proton was second with a 28.9% market share.

Total vehicle sales grew 13% to a record 605,156 units last year and surpassed the previous record of 552,316 units achieved in 2005.

According to the Malaysian Automotive Association, sales are expected to hit another record of 618,000 units in 2011.

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