23 Feb 2012

Peugeot in talks with GM

11:59 am on 23 February 2012

Shares in French car company Peugeot jumped 12% on Wednesday after news that it's in talks with General Motors.

Peugot has warned the talks may not lead to anything, but it's thought the two companies may team up on manufacturing in Europe to reduce costs.

UBS automobile analyst Phillippe Houchios says there are benefits to such an alliance.

Last year, Peugeot's car-making business reported a loss due to tough conditions in the European car market.

GM reported record annual profits last year of $US9.2 billion. But the BBC reports its European operations lost $US747 million and GM is planning further cost cuts.

Any deal would require the approval of the Peugeot family, which holds 30% of the company's shares. Because of the way those shares are structured, the family has 48.3% of voting rights among shareholders.