France's PSA Peugeot Citroen is keen to work jointly with ailing auto maker Proton but Malaysia will ensure the pact does not hurt the local auto industry.

"There is an interest to collaborate and to work together," Nor Mohamed Yakcop, second finance minister told reporters.

"We are talking to make sure that whatever we implement is in the interest of Proton particularly, and of course in the interest of the nation and the industry," he added.

Nor Mohamed said he had met with Peugeot officials previously and that talks were ongoing.

"There are no specific meeting dates but I have met them and the meeting is ongoing," he said.

A local newspaper Saturday said that top officials from France's PSA Peugeot-Citroen will meet with Malaysian finance ministry officials this week to place a bid for Proton.

But Nor Mohamed said he was not aware if Peugeot was keen for a stake.

"No, we do not know the terms (of the talks)," he said.

Competition from VW

PSA Peugeot was believed to have brought forward the meeting after it was reported that German automaker Volkswagen was keen to take a majority stake in Proton's manufacturing arm.

Proton and PSA Peugeot recently signed a letter of intent to evaluate and study possible cooperation. The first round of talks began in September.

PSA Peugeot is the second-largest European car manufacturer, posting a market share of 14.5 percent in 2005.

The Business Times newspaper Saturday said top PSA Peugeot officials would brief senior staff from the finance ministry, Proton and the government's investment arm, Khazanah Nasional, which has a 43 percent stake in the local car maker, on its plan.

Talks would centre on the possible entry of PSA as a stakeholder in Proton's manufacturing unit and on technical cooperation, it said.

Proton's survival

Nor Mohamed recently said Malaysia was also talking to Volkswagen of Germany, Europe's biggest car maker, to ensure the survival of Proton.

"If, in the nature of things and the context of circumstances, it is necessary to bring in a foreign partner, we will bring in a foreign partner," the minister said.

"Our mind is open," he said, adding that the decision would be based on which party could best serve Proton and the nation's interests.

Analysts say Proton needs to find a strong foreign partner to help revive its fortunes - it reported a RM58.6 million loss in its first quarter to June.

The company's market share has fallen steadily in recent years as the auto market has been liberalised to allow greater foreign competition.