GM, PSA May Have Shelved Talks About Deeper Ties

Alliance partners General Motors Co. and PSA Peugeot Citroen have suspended preliminary discussions about extending their strategic alliance, Reuters reports.

The news service cites unidentified sources who say the two companies were considering a full merger of PSA's auto operations and GM's Opel unit.

The partners never confirmed such talks which were first reported last month. PSA now declares that no tie-up negotiations are currently under way. The companies agreed in February to share purchasing, logistics and product development.

GM and PSA agreed to a "pause" in talks until at least 2014 in part because of the French company's deteriorating cash position, according to Reuters. It says another major factor was PSA's acceptance late last month of €7 billion ($8.9 billion) in government loan guarantees for its finance arm. That deal may squelch the company's plans to close a factory near Paris and shed 8,000 jobs in France.

Opel is seeking labor concessions and has said it will shutter an assembly plant in Germany after 2016.

A merger would require to deep cuts to jobs and factories at both companies. A deal in which only Opel made sacrifices would be impossible, Reuters' sources say.