Malaysia's second finance minister, Nor Mohamed Yakcop, said Monday that talks on a strategic alliance between national carmaker Proton Holdings and Germany's Volkswagen AG are 'going well'.

"Sensitive issues are being resolved and there is goodwill on both sides," Nor Mohamed told reporters on the sidelines of a conference.

However, he declined to state when the talks will be concluded.

AFX said that Nor Mohamed has previously said the government wants to see an alliance between Proton and Volkswagen concluded by the end of this year.

Under pressure Proton has been talking to a number of other potential partners including GM and PSA, but discussions are thought to have hit obstacles in the area of equity stakes. Inetrnational OEMs are attracted to Proton's spare manufacturing capacity and the prospect of working with Proton to boost share in the ASEAN region.