Would GM Merge Opel with PSA?

General Motors Co.'s Opel unit and PSA Peugeot Citroen are in talks about combining their auto operations in a joint venture, thus expanding the alliance they created in February, according to news reports that cite unidentified sources.

La Tribune, which first reported the story, says an agreement on a 50:50 venture may be reached by year-end. The Paris-based business daily says the deal might require GM to contribute cash to the venture because Opel's operations are worth less than those of PSA.

The Opel and Vauxhall brands posted 2011 sales of €17 billion ($21.9 billion), about two-thirds the revenue generated last year by Peugeot and Citroen.

Automotive News Europe says GM would take a 30% stake and inject as much as $10 billion in the venture. The smaller stake would allow GM to deconsolidate Opel's financial results, the online newspaper notes.

Opel's losses of more than $15 billion since 1999 have dragged down the American company's financial performance. Morgan Stanley estimates Opel will lose an average of about $1 billion per year through 2021.

La Tribune reports that the Peugeot family, which owns 37.9% of PSA's voting stock, is divided on the proposal. Some regard it as the way to rescue the company's floundering business. Others have misgivings that PSA might surrender too much control.

The newspaper adds that the French government would likely share those concerns. France considers its domestic carmakers key to the country's economic future.

GM declared last week that the unit is not for sale. A joint venture might satisfy the company's stated goal of retaining Opel's small-car engineering expertise and presence in the European market.

But The Wall Street Journal says the partners are still discussing only specific shared projects such as purchasing and development of new models. Those were the goals the companies outlined when the alliance was formed.