Malaysian national carmaker Proton on Tuesday replaced its chief executive, Tengku Mahaleel Ariff, ending weeks of speculation over his future after he criticised the government's policy on the auto sector.

Proton said late Monday that after nine years in the job, Mahaleel's contract would not be renewed and he would be stood down from Tuesday.

"With these decisions, it is clear the board is committed in its resolve to see Proton continue to be managed in the most professional and efficient manner, in the interest of all its stakeholders," it said in a statement.

The row flared up in May when Mahaleel, who has been fighting a slump in Proton sales in the face of a flood of foreign imports, said the automaker had been "poorly treated" by the government.

He said that its policy of removing protective tariffs under a regional free-trade pact was damaging the performance of the carmaker which was launched in the 1980s as part of a national industrialisation drive.

His complaints also touched on a controversial permit scheme for car imports, in operation for decades, which critics said was being used to dump vehicles in the domestic market at below their true value.

Trade Minister Rafidah Aziz retorted by saying that Proton's poor quality was to blame for its declining market share and that the carmaker should become more competitive in order to face a newly deregulated environment.

Former premier Mahathir Mohamad, an adviser to the carmaker which he helped launch, rushed to Mahaleel's defence and shone the spotlight onto the Approved Permits (APs) given to ethnic Malays under an affirmative action policy.

Mahathir is calling for an urgent press conference this morning to address the matter. The former premier had just returned from an overseas trip.

Asked to show cause

The government was pressured into releasing the list of permit holders, which highlighted four men, including two former trade ministry officials, who received more than 28,000 of the 67,158 permits issued this year.

The revelations fuelled rumours of corporate cronyism and unleashed a firestorm against Rafidah, who was booed and heckled by her own party members at their general assembly last week.

Rumours of Mahaleel's departure have been circulating for weeks after the Proton board reportedly asked him to "show cause" why he should not be removed for his criticisms of the government.

Proton used to sell six out of every 10 new cars in Malaysia but growing foreign competition is eating into its market share which fell to 44 percent last year from 48 percent in 2003.

Proton Holdings shares were sharply higher in early trade on news of Mahaleel's departure. Proton was up 0.65 ringgit (0.17 dollars) or 7.69 percent at 9.10 ringgit.