Struggling Japanese automaker Mitsubishi Motors will form a new tie-up with Proton that would help the embattled Malaysian carmaker develop new models.

The tie-up will include a technology transfer, mutual supply of auto parts, including engines, and allow Proton to create new models, the Asahi Shimbun reported today, quoting unnamed company sources.

The tie-up could also pave the way for production of Mitsubishi vehicles in Proton plants, the daily said.

Mitsubishi Motors president Osamu Masuko will visit Malaysia Friday to sign a statement of mutual agreement with Proton, it said.

A spokesman for Proton confirmed Masuko's upcoming visit to sign an agreement with the national carmaker.

"The visit is because of the signing of the agreement tomorrow," the Proton spokesman said Thursday. "All the details will be released tomorrow."

A Mitsubishi Motors spokesman declined comment on the report, only saying that a press conference would be held at a later date.

Foreign partner

Proton has been desperate to woo a foreign partner to ensure its survival. Its share price plunged last month after Volkswagen quashed speculation it would seek a controlling stake.

Mitsubishi, Japan's only loss-making major automaker, sold its seven percent stake in Proton in March 2004 as part of its efforts to come out of the red but still provides some production parts and components to the Malaysian company.

The Japanese firm last month denied a report that emerged in Malaysia that the two companies would set up a new plant as a joint venture.

Mitsubishi Motors has been struggling to return to profit following years of slumping sales caused by a series of defect cover-up scandals.

"The benefit of expanding a money-generating business (in Malaysia) is significant for us," an unnamed Mitsuibishi senior official was quoted as saying in the Asahi report.