Volkswagen is in talks with Proton about a join venture that would give the German auto giant a foothold in Southeast Asia.

"We are talking with Proton about some co-operation but I can't comment any more than that,'' said a VW spokesman.

A partnership would help the state-controlled Proton develop more models and stem its sales decline as the government removes protective import tariffs. It may also replace the Mitsubishi Group, which sold its stake in Proton this year after helping set it up in 1983.

VW would in return have access to the Proton plant, which has excess capacity, to produce cars for the region.