Malaysian car maker Proton has abandoned an ambitious but short-lived plan to expand into the motorcycle business, with the sale of a stake in Italy's MV Agusta Motor, reported The Australian yesterday. The company said it had now sold its 57.57 per cent interest in the European business to Italy's GEVI Spa for a symbolic 1 euro, but the buyer would assume the 107 million euros ($174 million) in debt.

The rationalisation comes as state-linked Proton struggles to cope with rising competition and a falling market share at home. It is also trying to seal a deal to sell a strategic equity stake to Volkswagen, the European car maker. "I see (the disposal) as a positive move," said S Sharath, an automotive analyst at MIDF Sisma Securities in Kuala Lumpur. "Right now, Proton has to concentrate on its core business. They have to get rid of businesses which are pulling them down." Last week, Proton confirmed press reports in Italy about a possible sale. MV Agusta, which is under bankruptcy protection, makes bikes under the Agusta, Cagiva and Husqvarna brands.

Proton splashed out 70 million euro to buy Augusta in December last year in a move that took it beyond its main car-making business and surprised analysts. But Augusta has gone on losing money, contributing to Proton's own flow of red ink. Last month, Proton reported a quarterly net loss of 154.3 million ringgit ($56 million), weighed down in part by provisions of 160.7 million ringgit to pay off Augusta's debts. Proton has been under increasing pressure at home, with its share of domestic sales falling to 44 per cent from 75 per cent over the past decade.
 

From next week, Proton will get a new chief executive, Zainal Abidin Syed Mohamad Tahir, formerly deputy managing director at rival Perodua Auto. Analysts said Mr Zainal Abidin would have approved yesterday's house-cleaning transaction, reversing a decision made by his predecessor.

Mahaleel Ariff, who did not have his contract renewed by Proton last July, had championed the Italian purchase. Mr Mahaleel even backed a plan to brand a range of cars under the existing Augusta names, with the MV Augusta conceived as a premium luxury sedan and the Cagiva as a sporty hatchback.

The proposed sale was consistent with Proton's direction of divesting non-core assets, the car maker said in a statement yesterday.