KUALA LUMPUR: National car manufacturer Proton Holdings Bhd and Japan’s Mitsubishi Motors Corp are close to signing a working agreement which will entail the Japanese automaker utilising Proton’s production facility in Tanjung Malim, Perak, sources said.

The tie-up is said to give Mitsubishi access to Proton’s plant in Tanjung Malim for export to the Asean region, sources with knowledge on the matter told The Edge Financial Daily.

Sources also said both car manufacturers are looking to form a joint-venture (JV) company to manufacture small vehicles in which both parties would have equity stakes. The precise shareholding structure of the JV entity is currently uncertain but Proton is believed to be taking up a controlling stake.

At present, it cannot be confirmed that the vehicles produced under this deal will carry Mitsubishi’s brand name.

Proton officials declined comment when contacted yesterday.

Market observers opined that if the partnership for the utilisation of Proton’s Tanjung Malim plant happens, it could enable Mitsubishi to use Malaysia as its regional manufacturing hub and tap into the benefits under the Asean Free Trade Area (Afta).

“Mitsubishi could benefit from the low trade barriers enacted under Afta to export their vehicles to the Asean region. The earthquake in Japan in March this year may have also been an additional reason,” said a market observer.

This prospective joint venture appears to build on both car manufacturer’s longstanding relationship which has had roots since Proton was established in the 1980s.

Mitsubishi had once held an equity stake in Proton before selling its interest to Khazanah Nasional Bhd, which is currently Proton’s single largest shareholder.

Having modelled its earlier vehicles after Mitsubishi’s cars, Proton in October 2008 renewed its technology transfer agreements with Mitsubishi for the production of the Proton Inspira to replace its Proton Waja car.

Proton Inspira, which is modelled after Mitsubishi Lancer, was subsequently launched in November last year. Sales however have been slow causing manufacturing to stop temporarily.   

Apart from Mitsubishi, Proton is exploring feasibility studies with another Japanese car manufacturer, Nissan Motor, for the potential use of Nissan’s platform and powertrain.

Proton’s prospective partnership with Nissan had drawn investor interest on hopes that the tie-up could bear fruit for Proton’s plans to roll out a global entry car.

Meanwhile, Proton’s share price has been on a downtrend, slumping to a two-year low of RM2.70 on Sept 6, due in part to weak market sentiment and disappointing results in its first quarter ended Sept 30 (1QFY12).

In 1QFY12, Proton’s net profit plunged 94.62% to RM4.55 million from RM84.68 million a year earlier on the back of a small revenue drop of 2.46% to RM2.23 billion from RM2.29 billion a year ago.

The dismal earnings was attributed to higher expenses incurred by its wholly owned unit Lotus Group International Ltd, which has been criticised as a costly foray into the sports car market.

Nevertheless, Proton said the higher spending at Lotus was partially offset by higher turnover in Proton’s domestic sales volume.

Last year, Proton revealed that it forecast Lotus’ capital expenditure for the latter’s turnaround plan to total about £480 million (RM2.37 billion) over a five-year period.

Quarter-on-quarter, Proton’s net profit fell 92.61% to RM4.55 million from RM61.64 million while revenue slid 14% to RM2.23 billion from RM2.62 billion a quarter ago.

Proton’s shares yesterday gained one sen to RM2.81 with 103,800 shares traded.