Leading French carmaker PSA Peugeot Citroen is in talks with US giant General Motors on forming a "strategic partnership", French Labour Minister Xavier Bertrand said Wednesday.
Peugeot shares surged 8.48 percent on the Paris exchange as news of the possible huge tie-up between the two industry giants spread.
"The chairman of the group informed me last night about discussions for a strategic partnership, and told me it was good news for the group", Bertrand told Europe 1 radio following press reports.
Bertrand said Peugeot chairman Philippe Varin had told him the deal would allow the French group to cut its production costs, but he would not be drawn on whether the plan was for a full merger or a simple alliance.
The minister said the talks were broadly good news, but that his government was seeking assurances French jobs were safe. President Nicolas Sarkozy is due to seek re-election in nine weeks and Peugeot is a major employer.
Peugeot confirmed overnight it was in talks with another carmaker, without identifying GM, and the business daily Les Echos said the two groups were planning to announce their alliance at the Geneva motor show next month.
The Financial Times said the alliance would see Peugeot and GM's European subsidiary Opel Vauxhall jointly developing parts and engines in Europe for vehicles sold under their respective brands.