Malaysia's troubled automaker Proton is heading for massive losses in the three months to September due to red ink at its Italian subsidiary MV Augusta, the New Straits Times said today.

The daily cited an industry source as saying that Proton's second-quarter losses could run to RM700 million (US$185 million).

"It looks like the red ink from MV Agusta has spread to Proton's own books," the unnamed source was quoted as saying of the Italian motorcycle manufacturer.

"Undertaking MV Agusta's outstanding debts with banks and suppliers turned out to be a very expensive venture and now Proton is paying a high price for its foray overseas," he said, adding that the subsidiary acquired only last October could be sold off.

Proton announced a disappointing RM12.35 million (US$3.3 million) net loss in its first quarter to June, compared to a profit of RM166.47 million a year earlier.

The second quarter result is due to be announced this week but the Straits Times said analysts were prepared for it to contain more provisions amid preparations for an expected tie-up with German's Volkswagen.

Poor image

Proton is believed to be seeking the partnership in a bid to stem its falling market share and persistently poor image as a low-quality and over-priced manufacturer.

Analysts have said that Proton, which is struggling to cope with stiff competition from imports, must overhaul itself and forge an alliance with a foreign partner if it wants to remain viable.

However, Proton has said only that it will continue to consider various business opportunities and technical collaborations, including with Volkswagen, but that no deals have been reached.