The government today confirmed that General Motors Corp is discussing taking a stake in struggling automaker Proton, which has also attracted interest from Volkswagen and PSA Peugeot Citroen.

"GM is interested in Proton and we are looking at it," Second Finance Minister Nor Mohamed Yakcop told reporters, adding that the government will select a strategic partner for Proton by the end of March.

"We have come to the end of our discussion with the various parties and we are now evaluating who is the best," he said.

The New Straits Times this week reported that GM is planning to make a bid for Proton, and that since November GM officials have met several times with Proton management and shareholders.

It said the bid - the US auto giant's third approach towards Proton over the past decade - involves a plan to take a small stake at the holding level, as well as a stake in its manufacturing arm.

The Malaysian government is currently negotiating a partnership deal aimed at providing Proton with the expertise it needs to arrest a sharp decline in market share in a newly competitive market.

It owns 59 percent of Proton, including a 43 percent stake held by its investment arm Khazanah Nasional.

Three Malaysian automotive companies - DRB-HICOM, the Naza group and the Mofaz group - have expressed interest in acquiring all or part of the government's stake.

However, earlier reports said the government prefers to choose a foreign partner.

Proton Holdings Bhd was sharply higher after the confirmation of GM's interest, rising RM0.15 or 2.40 percent to RM6.40 in morning trade.