The European auto company Volkswagen is studying Malaysia's car maker Proton for a possible strategic alliance, Prime Minister Abdullah Ahmad Badawi confirmed for the first time.

He told AFP late Wednesday it was important for Proton to be "comfortable" with its potential partner.

"And as soon as that is confirmed, then I believe we must tie up the deal as quickly as possible," he added, in the first official confirmation that talks between the Asian and European car makers were going on.

He gave no other details of the possible tie-up.

If the alliance is pushed through, it is expected to give Proton a boost in efforts to reclaim its top spot in the local car market as well as help it get a foothold in the lucrative European market.

Abdullah said Proton's launch yesterday of its flagship sedan, the Persona, had "nothing to do" with the timing of Volkswagen's "due diligence" study.

"But it does prove to everyone in the world that Proton is still capable of coming with an excellent and superb product," he said on the sidelines of an awards ceremony.

"We are confident that Persona is the product that will put Proton back in the map and as the leader in the Malaysian market."

Persona replaced the 14-year-old Wira model, whose sales have fallen. The sleek 1,600 cc Persona sedan is aimed at helping Proton recover its formerly dominant position in the local car market, now held by rival Perodua.

Proton recently reported bigger-than-expected net losses of RM591.36 million for the year to March 2007.