German automaker Volkswagen will collaborate with Proton on a range of technical and training projects, but has given up plans for any shareholding, the Malaysian carmaker announced.

Proton said in a statement late yesterday that the two would cooperate on technical and engineering matters, training and other commercial projects, including the possibility of supporting VW-AG to explore the Malaysian dealers' network.

The deal was confirmed by VW-AG on Thursday via an official letter, the firm said.

"With this understanding, Proton Holdings and VW-AG have now decided to bring to an end the proposed collaboration envisaged under the Memorandum of Understanding signed by them in October 2004," it said.

"We have moved past the issue of VW-AG eyeing any kind of shareholding and we are now able to work on specific initiatives that complements Proton's capabilities and current range of products," a Proton spokesperson said.

Both parties were now expected to move quickly to hold technical discussions to negotiate details of their new cooperation arrangement.

Different ideas

Volkswagen chief executive Bernd Pischetsrieder told analysts at the Detroit auto show earlier this month that the alliance, under negotiation for the past year, had collapsed and that any future cooperation would be limited in scale.

"When it comes to Proton in Malaysia, we had a very specific idea of how we wanted to proceed there. Unfortunately the Malaysian government, Khazanah and Proton had different ideas," Pischetsrieder said in a presentation posted on the company's website.

"Therefore what we wanted in the cooperation with Proton will not materialise," he said.

The remark spooked investors and sent Proton's shares plunging.

Khazanah is the Malaysian government's investment arm which holds about a 38 percent stake in the troubled carmaker.

The alliance with Volkswagen was seen as an opportunity to turn the business around by reversing its reputation for poor quality and a lack of innovation.

From a market share of 60 percent in 2002, Proton saw a decline to 48 percent in 2003, 44 percent in 2004 and then 41 percent in 2005.