Volkswagen AG Is Considering Expanding Production in Malaysia

Volkswagen AG is thinking about expanding production in Malaysia and has sent senior executives, which include management board members, to evaluate Proton Holdings Bhd’s operations for a potential relationship, a person acquainted with the matter said.

Europe’s largest auto maker is thinking of producing vehicles at Proton factories after its partner DRB-Hicom Bhd. DRB decided last month to buy 43 percent of Proton, the person said, decreasing to be identified because the talks are private.

Volkswagen has flirted with a Proton partnership in the past. The German carmaker called off cooperation talks with Proton in June 2010. The two companies also failed to reach an agreement in November 2007 after 12 months of negotiations. The partnership with DRB-Hicom was agreed in December 2010.

The Proton deal gives DRB control of two Malaysian car plants with the capacity to make a combined 350,000 vehicles per year. Proton’s vehicles are driven by taxi drivers across Malaysia and are among the cheapest cars and auto parts sold in the country. The company had two annualnet losses over the past five years.