GM studying Opel and Peugeot tie-up

US car group General Motors is considering merging its troubled German unit Opel with French carmaker PSA Peugeot Citroen, in which it already holds a 7-percent stake, the business news website Latribune.fr reported on Friday. “The project being studied foresees the creation of a joint company, with each of the two manufacturers holding equal stakes,” the website cited a source as saying.

Peugeot declined to comment when contacted by AFP. The company's shares jumped by five percent following the publication of the report. The report said the tie-up was just at the exploratory stage and had not been submitted to Peugeot's board, although it said that could happen by the end of the year.

It added that the tie-up would not include other Peugeot units such as its finance division, car equipment manufacturer Faurecia or logistics group Gefco.

With the European car market in the doldrums due the eurozone debt crisis, manufacturers are faced with the heavy losses and overcapacity.

Peugeot, which lost 819 million euros ($1 billion) in the first half of this year, announced in July that it intends to cut 8,000 jobs.

GM suffered $656 million in losses in Europe in the first half of the year, and while Opel adopted in June a huge restructuring plan, so far unions have succeeded in keeping the company from cutting jobs and closing any factories.

AFP