Malaysia has said it will never give up control of Proton to a foreign firm, as it struggles to find a strategic partner for the loss-making national car company.

Malaysia has for months been in talks with German automaker Volkswagen and US auto giant General Motors for a tie-up that would help Proton arrest a sharp decline in market share.

But Deputy Prime Minister Najib Razak said any potential partner had to realise that Proton would never be allowed to fall under foreign control, the state Bernama news agency reported.

A collaboration "must be in line with our thinking and our position, otherwise there cannot be an agreement," Najib was quoted as saying late Friday.

"What this means is that we will not simply hand over Proton, we have our stand that a prospective strategic partner must accept," he said.

His comments follow an apparent last-ditch attempt to forge a strategic alliance with Volkswagen after Prime Minister Abdullah Ahmad Badawi said Thursday said talks had been abandoned with the German carmaker.

Abdullah said Volkswagen was not keen on Proton's proposals on equity participation, and the Malaysian firm needed to start talks with other parties.

But officials said Friday Volkswagen had requested a final round of talks.

Under intense pressure

The wrangling came as Proton Thursday posted larger than expected net losses of RM591.36 million (US$174 million) for the year to March 2007.

The carmaker blamed weak sales and higher production costs for a reversal from the previous year's profit of RM46.69 million.

Najib said Proton had to take steps to turn around its fortunes.

"We don't want to see it wallowing in debt even though the environment and market have become more competitive," he said.

The government is under intense pressure to forge a partnership for Proton, but has so far missed two self-imposed deadlines to make a decision.

The state owns 59 percent of Proton and analysts have partly attributed difficulties in talks over government reluctance to cede control of a key national company into foreign hands.

Second Finance Minister Nor Mohamed Yakcop Friday said Malaysia would decide on a partner for Proton within the next three months.