PSA Peugeot Citroen is reportedly talking to General Motors about a broad manufacturing alliance.
The idea is to reduce their losses in Europe and lower production costs worldwide.
The discussions are said to have been underway for months and are focused on sharing vehicles and parts rather any major tie-up of capital.
GM is currently the world’s biggest carmaker; year it sold just over nine million vehicles, up 7.6 percent on 2010.
Its European unit accounted for 1.23 million of those sales with increased sales of 3.2 percent .
Peugeot — Europe’s second biggest manufacturer — saw sales slip by 1.5 percent last year to 3.55 million.
GM’s Opel/Vauxhall division made a loss last year and is facing major restructuring.
Industry analysts said they could not see how a tie up would help two companies with similar problems —overcapacity and dependence on Western European small-car buyers.
Peugeot acknowledged alliance talks are taking place but would not say who with adding: “There can be no certainty at this stage that these discussions will result in any agreement.”
Peugeot recently announced new cost cuts and put its Gefco logistics business up for sale. The money raised would help finance the overseas expansion it badly needs to reduce exposure to stagnating home markets.