The government has been in talks with Volkswagen for a partnership seen as vital to Proton's fortunes but Abdullah said the German carmaker had dropped out as an equity partner out after disagreeing with proposals for the tie-up.

"I have decided, since Volkswagen is not interested in the proposal that Proton wants in terms of equity, Proton needs to talk to other people," Abdullah was quoted as saying late Thursday by the state Bernama news agency.

Nearly six months of negotiations with French car giant PSA Peugeot-Citroen for an alliance collapsed in March while talks with Mitsubishi of Japan have also been unsuccessful.

Abdullah had said earlier that Malaysia would talk to US motor firm General Motors if talks with Volkswagen were to fall through.

The news came as Proton posted larger than expected net losses of 591.36 million ringgit (174 million dollars) for the year to March 2007.

The carmaker blamed weak auto sales amid stiff competition and higher production costs for a reversal from the year earlier profit of 46.69 million ringgit.