Ailing national carmaker Proton and Germany's Volkswagen AG will hold a third round of talks this week in an attempt to secure a partnership by yearend.

"(The talks) should be held this week," a Malaysian official familiar with the negotiations told AFP on condition of anonymity.

The official declined to disclose the location of the talks.

The Malaysian team comprises officials from the Prime Minister's Department, Finance Ministry and Khazanah.

The previous two sessions were in New York and Bangkok earlier this month.

Azman Mokhtar, managing director of state investment arm Khazanah Nasional, on Tuesday said that a deal was expected to be clinched by yearend, adding that Volkswagen and US giant General Motors were vying to become the strategic partner for Proton.

"Talks are ongoing. We are making steady progress ... The overall deadline is yearend," he said.

The official said Malaysia was conducting "multilateral talks" but the conversation with "GM was less active."

Intense pressure

In late Wednesday trading, Proton shares were down 3.2 percent or 20 sen at RM6.05.

Khazanah is the controlling shareholder in Proton, with a 42.74 percent stake. State pension fund EPF and national oil firm Petronas own 12.07 percent and 8.84 percent respectively.

Officials had said that Proton and Volkswagen were cautiously edging towards a partnership after a second round of talks in Thailand.

The government is under intense pressure to announce details of a partnership for Proton in a bid to provide it with the expertise to stem a sharp decline in market share and cut financial losses.

Proton last year lost its status as Malaysia's biggest-selling automaker to homegrown rival Perodua and recently reported larger than expected net losses of RM591.36 million for the year to March 2007.