Proton Holdings, Malaysia's national automaker may soon ink a technical agreement with Volkswagen (VW), allowing the German carmaker to take a 51 percent stake in Proton's manufacturing and engineering units, a report said Friday.

The Malay Mail newspaper, citing an industry source, said an agreement with VW may be signed in the current quarter.

Proton, which has been hit by falling sales, had previously said it and its subsidiaries would continue to initiate and consider various business opportunities and technical collaborations, including those with Volkswagen.

"We are currently still in discussions with VW. At this juncture there are no significant developments, agreements or conclusions that warrant announcement," the country's biggest car maker said in a statement to the stock exchange Monday.

Loss in first quarter

That statement was made following a report that conglomerate Sime Darby iwas planning to buy a 32 percent stake in Proton from state-owned Khazanah Nasional Bhd.

Proton, whose sales have declined due to competition from imports, recently announced a RM12.35 million net loss in its first quarter to June, compared with a profit of RM166.47 million a year earlier.

Proton used to sell six out of every 10 new cars in Malaysia but sales have been tumbling over the past few years due to growing foreign competition from Toyoto, Honda and South Korea's Kia who are able to roll out new and quality models more frequently.