A Porsche spokesman in Stuttgart confirmed the news amid speculation of the possible involvement of a Middle Eastern investor. Details are still sketchy, but the Financial Times newspaper quoted sources close to the talks as reporting that the Qatar Investment Authority was interested in a stake of up to 25 percent in Porsche's holding company.

Analysts say such an investment would considerably strengthen Porsche's bargaining power in troubled merger talks with Volkswagen.

News of a possible Gulf investor comes as Porsche continues to struggle under a nine billion euro debt resulting from a planned takeover of Europe's largest car manufacturer.

Porsche, which owns more than 51 per cent of VW, had been looking to raise its stake to 75 per cent.

Before the global economic crisis struck the auto industry six months ago, the Stuttgart-based sportscar maker sold 100,000 units per year, with annual revenues of about seven billion euros. In contrast, Volkswagen recorded sales of six million vehicles resulting in a turnover in excess of 100 billion euros.

The struggle for control of Volkswagen led to a split between VW supervisory board chairman Ferdinand Piech, who is a part owner of Porsche, and the Porsche family, which holds a majority stake in the carmaker.

Just over a month ago, Porsche seemed to finally abandon its ambitious bid to take full control of VW, with the two carmakers saying they would discuss the terms of a merger. But disagreements quickly surfaced between the two families that control the companies.

However, the two firms released a joint statement a couple of weeks ago reaffirming their intention to push ahead with a merger. It said both firms would work towards that goal in a constructive way.

Still, there's been no word of what progress, if any, has been made so far and no details have been disclosed as to what form any single entity would take.

In recent weeks, Porsche workers have held protests following comments by VW chairman Ferdinand Piech that he favoured a takeover of Porsche by his company.

In response to news of the latest talks with the Qatari investor, a VW spokesman has been quoted as saying that any option that supports the goal of an integrated group with 10 brands would be welcome.

If the deal with the state of Qatar materialises, it would be the second major investment by Middle Eastern interests in Germany's auto sector. In March, Abu Dhabi's state investment fund Aabar Investments bought a nine percent stake in Daimler, which owns Mercedes-Benz.

rb/dpa/AFP

Editor: Chuck Penfold