Yes, the talks have collapsed! Just as we thought they could result in productive ventures, talks were dropped by Proton Holdings Bhd.

Malaysia dismissed the need for its national carmaker Proton to form an alliance with either Volkswagen AG or General Motors Corp. in the near future, the government said Tuesday, reported Houston Chronicle. State investment arm Khazanah Nasional, which owns a controlling stake in Proton, said that the company has "discontinued negotiations" with both companies.

"It's a big set back for Proton,'' said Raymond Tang, who oversees $5.4 billion at CIMB-Principal Asset Management Bhd. in Kuala Lumpur. "The company needs new technology from a partner. They don't have the resources to make it on their own.''

Proton, which has reported 5 straight quarterly losses, had been looking for a partner to help produce fresh models and revive sales. While demand for a new Proton rolled out in August beat company forecasts, that won't be sufficient to allow the 24- year-old carmaker to go it alone, some analysts said.

"Although management has done a commendable job at turning around the company, it probably won't be enough,'' said Vincent Khoo, head of research at Aseambankers Malaysia Bhd. in Kuala Lumpur. Proton still needs a partner, he said.

The company lost 589.5 million ringgit ($175 million) last fiscal year. The search for a partner followed the end of an alliance with Mitsubishi Motors Corp. in 2004, and the loss of half of Proton's market share to competitors such as Toyota Motor Corp.

The struggling company had been in talks with the U.S.-based GM and Germany's VW about a possible partnership to reverse its fortunes. But Khazanah said Malaysian officials have recently seen positive developments in Proton, especially improved domestic sales and exports.

"Proton's management should be allowed to continue with its plans to further strengthen the company," he added. "The issue of strategic alliance, if necessary, can be considered at a later date."

Separately, Second Finance Minister Nor Mohamed Yakcop said that Proton, which saw a loss of 591 million ringgit ($169 million) in its 2007 financial year, is expected to narrow its loss in the current year, the national Bernama news agency reported.

Still, the new Persona sedan, introduced in August, notched up 22,000 bookings by the end of October, Nor told reporters late yesterday. Proton, which planned to sell 4,000 of the vehicles a month, may report a profit in 2009, reported Bloomberg.

"We must give Proton management the flexibility to move on and carry out its turnaround plan,'' Nor noted. "We are not saying there will be no strategic partnership. It's a very attractive idea, but we also have to look at the interest of the country.''