Mumbai: Malaysia''s Proton Holdings Bhd is closer to a partnership deal with Germany''s Volkswagen after two rounds of talks between the two carmakers, Malaysian newspapers reported.

State-controlled Proton, which is 43 per cent owned by state investment arm Khazanah Nasional Bhd, is in talks with Volkswagen as also General Motors of the US to sell part stake in the loss-making company.

While a third round of talks with Volkswagen is likely, talks with General Motors are also under way, the government said last month. However, Volkswagen is considered to be the frontrunner to partner Proton.

Under the new proposals, Proton will control the domestic distribution network while Volkswagen will handle international distribution, reports quoted unidentified sources as saying.

VW may also have agreed to raise some fresh equity for a 51-per cent stake in the new company that will own key assets of Proton, the balance of the equity will be in the form technology injection and platforms.

Malaysia''s trade minister said while the country wants to sell its stake in Proton, it but won''t make a hastily decision.

Proton has been struggling with a steadily declining market share at home due to fierce competition, and has been unable to make up the shortfall through exports.

Its cars, however, have been big hits with the customers. Customers taking part in the UK''s largest car survey conducted by Which? magazine placed Proton dealers in second position when rating the overall dealership sales experience. Proton also did well in the overall reliability rating, finishing joint twelfth out of more than 30 manufacturers.

More than 99,360 owners responded to the survey with Proton customers clearly responding very positively. The Malaysian manufacturer has beaten off competition from Honda, Toyota, BMW, and Kia in the dealer rating and came second only to Lexus, who also achieved "Overall Best Dealer Brand".