General Motors and PSA/Peugeot-Citroen are exploring ways to combine their European operations in a second phase of the alliance they forged earlier this year, sources said.
One option is for GM's Opel/Vauxhall unit to merge with PSA's automotive operations in a joint venture, Reuters and the French newspaper La Tribune reported, citing sources who asked not be identified because the discussions are confidential.
GM could take a 30 percent stake in the joint venture and inject up to $10 billion into the new company, a source familiar with GM's thinking told Automotive News Europe. By taking a 30 percent stake, GM would not have to consolidate Opel's financial results, thus limiting the U.S. automaker's biggest financial liability, the source said.
In February, GM and PSA forged an alliance for joint purchasing of parts and to share vehicle platforms for the development of several future vehicles.
A person with knowledge of the talks told Automotive News that discussions about a deeper tie-up began within weeks of the alliance's being signed. The companies have explored different scenarios for combining operations to eliminate costs, including a sale of Opel to PSA, a sale of PSA's automotive division to GM and other combinations, the source said.
For months, GM Chief Financial Officer Dan Ammann and other executives have been sharing financial data with their PSA counterparts, including detailed information on labor costs for plant workers and engineers, the source said.
"There's too much capacity, not just assembly plants but also white-collar workers," the source said. "This would be a way to take two companies and turn it into one and get rid of a lot of those resources."
A GM spokesman said: "We're focused on earning the benefits of our alliance with PSA that we have identified."
The companies have said that within five years they expect to share at least $2 billion in annual savings from the purchasing and product-development alliance.
GM, Ford Motor Co., Fiat-Chrysler, Nissan-Renault and other mass-market automakers have seen losses in Europe accelerate amid a worsening economy there exacerbated by the continent's debt crisis. GM has lost more than $16 billion in Europe since 1999, including a $617 million loss during the first half of this year.
GM Vice Chairman Steve Girsky has been working on a restructuring plan for Europe since he was appointed chairman of Opel's supervisory board nearly one year ago. In July, GM CEO Dan Akerson named Girsky interim head of GM Europe following the reassignment of Karl-Friedrich Stracke.
Girsky reiterated this month that GM has no plans to sell Opel, following reports that Fiat-Chrysler CEO Sergio Marchionne had an interest in acquiring it.
Mike Colias contributed to this report