FACED with rising monthly losses and declining sales, Proton dealers have urgedthe national carmaker to form a strategic alliance with a foreign partner.

The call is the latest in a series from stakeholders - spare parts makers,used car dealers and others in the supply chain - affected by the Protoncrisis.

Indecision over Proton's future has led to 93 per cent of its 136 dealersrunning at a loss in the first three months of the year - up from 20 per centin 2005 - the Proton Edar Dealers' Association (Peda) said yesterday.

Proton's fortunes affect its dealers and suppliers - and the clock isticking for the bleeding automaker. Its cash reserves have dwindled toRM400-500 million (S$180-225 million) from about RM3 billion in 2004. And itdesperately needs technical assistance to shore up its ageing models. But thegovernment, which owns 43 per cent of the company via state investment groupKhazanah Nasional, is unwilling to relinquish control of the carmaker, sayingit is a national asset that should remain Malaysian.

Increasingly, the government appears to be in the minority camp, with Pedasaying only a foreign partner can give Proton the technical expertise andglobal platform to help it.

'Even Jaguar and Rolls-Royce are known as British products, but are notowned by the British,' Peda deputy president Armin Baniaz Pahamin told a newsconference.

A big problem is that many of Proton's vendor suppliers are bumiputras -ethnic Malays - and the government is worried that a foreign partner callingthe shots at Proton may be less sympathetic about decisions affecting theiroperations. Local car players DRB-Hicom and Naza are pushing for a tie-up withProton, but few see them adding much value to it.

The authorities appear lost for a solution. Reportedly in talks with GeneralMotors and Volkswagen to find a partner for Proton by a self-imposed deadlineof end March, nothing has emerged except senior government officials sayingmore time is needed. At the same time, foreign players negotiating from aposition of strength are in little hurry to seal a deal.

Proton's RM2 billion plant in Tanjong Malim runs way below capacity,churning out fewer than 100,000 cars a year for the local market. Exports arestill minimal and for the nine months ended December 2006, Proton's net losswas over RM590 million. Its shares are now RM5.15 versus a 52-week high ofRM8.15.

Attractively priced foreign cars, a drastic fall in used car values andtighter loans have hurt Proton's performance, slashing its market share to only30 per cent. But Peda president Wan Ahmad Sepwan said the key reason is ageingmodels. Mr Wan Ahmad also said that Proton Edar - Proton's distribution arm -is rudderless after its former head resigned seven months ago, with noreplacement in sight.

Last year, Peda members collectively lost more than RM20 million. Onaverage, a dealer in the Klang Valley needs to sell 40 vehicles a month tobreak even. Most only manage 10-15 units.

'None of us makes profit in thisbusiness,' said Mr Wan Ahmad.

Proton offered dealers RM150,000 to pull the shutters down, but few took theoffer and many are asking for at least twice as much. The compensation was tobe paid from a RM500 million Automotive Development Fund.