However, after months of negotiations with major global automotive players, Proton has yet to make any significant progress in securing a partnership deal and talks appeared to have come to a grinding halt.
Analysts believe that the situation has become critical for the national car project and painful decisions have to be made now to stop Proton from "bleeding" further.
Second Finance Minister Tan Sri Nor Mohamed Yakcop on May 15 said no progress had been made, but again said that the engagement of a strategic partner “will be resolved soon.”
Without elaborating, he said the government has yet to make a decision on the much-hyped foreign strategic alliance for Proton, and has also not set a deadline to conclude any agreement.
The government had earlier missed its own end-March deadline to strike a deal with a foreign carmaker for a partnership in Proton, fuelling speculation that talks with German carmaker Volkswagen AG, one of the suitors for Proton, had failed.
Nor Mohamed's statement comes in the wake of analysts' forecast that Proton will suffer a net loss of at least RM600 million for its full-year results for the financial year ended March 31, 2007 (FY2007), and this is the more optimistic part of the forecast spectrum.
For the first nine months of FY2007, Proton’s net loss stood at RM590.45 million.
Proton's sales over the last few years had declined to just about over 30% of domestic market share from a high of over 60% previously. Export sales, meanwhile, are nothing much to shout about.
Rosnani Rasul of TA Securities said Proton’s cash was rapidly depleting, down to RM627 million as at end Dec 31, 2006 from RM1.59 billion in March last year.
“What Proton needs fast is either a partner to lift it up with technical support or at the least, newer fuel-efficient models to compete with the likes of the new ViVA from Perodua,” she said.
She said that Proton’s year-to-date car sales volume of 110,000 units until February this year suggested that it was likely to miss TA Securities’ FY07 target of 125,000 units
“At best, we believe March sales are expected to reach between 8,000-10,000 units thanks to the newly launched model 'Proton Saga Merdeka Version'.
"Based on industry input, the demand for the latest model by Proton is expected to be a hit as the price offered at RM27,000 is affordable and appealing to the lower-income group,” she said.
However, Rosnani said given the slump in Proton car sales, the net loss would be at RM755 million, adding that its car sales for the year could at best be 120,000 units even with the Savvy and Waja Facelift models.
She said the only possible silver lining still in the horizon was the willingness of Prime Minister Datuk Seri Abdullah Ahmad Badawi to meet VW's chairman Ferdinand Piech.
“But a decision has to be made real fast, lest Proton financially bleeds further,” she quipped.
Aseambankers Research head Vincent Khoo said it was no easy task finding a partner to a company that was at the very heart of the national automotive industry, in that the livelihood of some 30,000 hinged very much on Proton’s survival.
“It is challenging to find a solution that will solve Proton’s financial needs for its turnaround and simultaneously fulfil the socio-economic duty of supporting the ancillary businesses that so depend on Proton,” he said.
Khoo said it was a tough situation for the government as the selection of a strategic partner for Proton must take into account not just shareholder interests, but that of those dependent on Proton.
“For Proton, its cash has dwindled a lot and before long, it would be in a net debt position. A decision must be made fast,” he said.