DRB-HICOM still in talks to market, assemble VW cars

DRB-HICOM Bhd is still talking to Volkswagen AG to market and subsequently do the local assembling for the German marque, group chairman Datuk Syed Mohamad Syed Murtaza. The talks with Volkswagen, Europe's largest carmaker, had been going on for sometime now, Syed Mohamad said. "We have been talking to them but there is no outcome yet," he said after DRB-HICOM's annual general meeting in Shah Alam, Selangor, yesterday. Syed Mohamad indirectly dismissed news reports that the potential tie-up with Volkswagen had hit a snag at the ministry level. It was unclear what the intention is and why, but there were suggestions that this was done to give priority to Proton Holdings Bhd given its status as the country's only full-fledged auto manufacturer. Volkswagen wants to set up a local assembly operation focusing on sedans by 2011, having already committed to investing about US$47 million (RM164 million) to produce multi-purpose vehicles and commercial vehicles in Indonesia. Industry observers see DRB-HICOM's under-utilised automotive complex in Pekan, Pahang, as a good site for such activity. DRB-HICOM has been trying for months to expand its Volkswagen business tie-up. The current deal is limited to the group being the importer of the German vehicles since April this year via wholly-owned DRB-HICOM Auto Solutions Sdn Bhd. This focus, industry observers said, had caused DRB-HICOM's partnership with General Motors Corp to run into a rough patch. This subsequently led to rumours that the pact it had with the US carmaker to distribute Chevrolet vehicles here had lapsed on August 31. Meanwhile, OSK Research Sdn Bhd said Volkswagen could also be talking to Proton again on the local production tie-up. "We do not discount the possibility of renewed talks with Proton given its under-utilised capacity, with a 50-60 per cent utilisation rate," the firm said in a note yesterday. Volkswagen nearly formed a partnership with Proton in late 2005. Negotiation was halted when the national carmaker's major shareholder Khazanah Nasional Bhd rejected Volkswagen's request for equity partnership.