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UPDATE 2-Malaysia Proton gets nod for revamp, eyes partners

(Recasts, adds analyst comment, details)

By Wong Choon Mei

KUALA LUMPUR, Jan 28 (Reuters) - Malaysia's top car maker Proton won shareholder approval on Wednesday for a corporate revamp, paving the way for possible partnerships to boost its competitiveness in domestic and global markets.

Proton Chief Executive Officer, Tengku Mahaleel Tengku Ariff, told reporters the firm was in talks to form strategic alliances with a couple of foreign car makers, but declined to name them.

Helped by two decades of special tax privileges, Proton has about half of Malaysia's mid-ranged passenger car market.

But of late, its business has suffered as rivals such as Honda and Toyota slashed prices to break its dominance in the lucrative sector.

Despite price discounts of its own, state-controlled Proton's market share fell to 49 percent with sales of 155,420 units in 2003, versus a 60 percent share or 214,373 units in 2002, data from the Malaysian Automotive Association showed.

Analysts said Proton had to wean itself from tax protection and improve its ageing model lineup, low-quality components and overstaffing.

"The global industry is consolidating," said Ngu Chie Kieng, research head at TA Securities. "Proton has to assess what are its chances of survival in the long term if it does not act."

In 2000, Malaysia said it would look for a possible foreign partner for Proton, but found no takers at that time. Top global carmakers like Ford and DaimlerChrysler were rumoured to be potential partners.

The firm, which has a market capitalisation of five billion ringgit ($1.3 billion), is 49-percent owned by government-linked investors and Japan's Mitsubishi Motors Corp has 15.9 percent.

Proton shares, up just 4.6 percent in the last 12 month's versus the wider stock market's 21.4 percent, were up 0.6 percent at 9.10 ringgit by the midday break.

NO HIKE IN PRICES

Proton Chairman Abu Hassan Kendut said a corporate revamp announced last May was expected to be complete by April, when its listing status would be transferred to Proton Holdings Bhd, a new investment holding firm.

Tengku Mahaleel also said the firm would not raise car prices, denying media reports it might follow rivals, which are expected to hike prices by as much as 10 percent following new tariffs announced by the government at the end of last year.

"You must remember our job is to make prices of cars more affordable," he said.

Prime Minister Abdullah Ahmad Badawi cut import taxes while raising excise duties to 60-100 percent at the end of last year, a move towards full compliance with trade rules agreed under a regional pact.

Southeast Asia's second largest car market, Malaysia has to reduce tariffs to between 0 and 5 percent by 2005 under the ASEAN Free Trade Agreement.

ASEAN groups Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam. ($1 = 3.8 ringgit)