Peugeot shares leap as it talks to General Motors about an alliance

Shares in PSA Peugeot Citroen, the second largest car maker in Europe, surged yesterday on news that it was discussing an alliance with General Motors (GM) of the US, which could see the two companies take stakes in each other.

A deal is aimed at saving costs for both companies.

GM owns Vauxhall in the UK and Opel, and said last week it plans a restructuring announcement of its European operations in the next few months.

Peugeot, which reported a cash outflow of €1.65bn (£1.39bn) for 2011, and GM would share technology and jointly develop components for future models, if the strategic alliance is sealed.

A statement confirming talks with an unnamed car maker sent Peugeot shares up 12 per cent. The French labour minister, Xavier Bertrand, said he had been informed of the talks, and would seek to protect jobs.

"The logical thing for them to do would be to close plants," said Max Warburton, an analyst at Bernstein. "But they've not been able to do it independently, and there's no reason to think they could do it together."