Malaysian national carmaker Proton has formed an alliance with Japan’s Mitsubishi Motors Corp. to jointly build a new car as part of efforts to modernize its vehicle lineup and improve component quality.

Mitsubishi will provide technical and engineering services under a product collaboration agreement, Proton said Friday in a statement.

The Malaysian carmaker has also been given a non-exclusive license to modify a Mitsubishi vehicle for sale under the Proton trademark. The alliance doesn’t include any equity shareholding, officials said.

“The understanding encompasses initiatives to be taken by both companies to improve both build and component quality for Proton vehicles,” a Proton statement said.

Proton didn’t give further details and company officials couldn’t be immediately reached for comment.

The Star newspaper said the two companies plan to build a small hatchback car that will be introduced after 2010. Under the pact, Proton’s new seven-seat multipurpose vehicle to be launched in March will also be marketed under the Mitsubishi brand in certain markets, the report said.

Both companies would explore possibilities on export and contract assembly for their vehicles, it said.

Mitsubishi helped set up Proton over two decades ago, but sold its stake in 2004 because of its own financial problems. The Japanese carmaker still supplies automobile components, including engines and transmission, to Proton.

Pressured by dwindling sales and growing competition as Malaysia liberalizes its auto market, state-owned Proton has been on the hunt for a new foreign partner to boost its fortunes after Mitsubishi left.

But its insistence on maintaining control has made it difficult for Proton to seal any meaningful partnership. It ended alliance talks with Germany’s Volkswagen AG and General Motors Corp. last year, partly due to government’s refusal to let foreigners take control of Proton, seen as a national icon.

Proton has improved its domestic market share to 33 percent so far this year, from 24 percent last year, after introducing several cheap models but its exports remained weak. The carmaker is pinning hope on the new multipurpose vehicle to prop up sales next year.

Proton has traditionally made only five-seat passenger cars.

With an increasingly competitive market, some analysts have warned it will be tough for Proton to penetrate global markets or gain new technology without a strong foreign partner.

source : Associated Press