Peugeot shares jump 12% on alliance talks
Peugeot shares have closed 12% higher after the firm said it was in talks about possible "co-operations and alliances".
France's labour minister said that Peugeot was in talks about a strategic alliance with General Motors.
Peugeot would not say which firms it was talking to. GM said it routinely talks to other firms in the industry.
Last year, Peugeot's car-making business reported a loss due to tough conditions in the European car market.
In a brief statement on Wednesday, Peugeot said: "In the context of its globalisation strategy and improving its operational performance, PSA Peugeot Citroen looks at potential co-operations and alliances."
"Discussions are taking place and there can be no certainty at this stage that these discussions will result in any agreement."
France's La Tribune said that, if the talks are successful, GM and Peugeot could announce an alliance at the Geneva car show in the first week of March.
London's Financial Times said the companies had been talking about developing vehicles together that would be sold under their respective brands.
Analysts are sceptical about the benefits of that sort of deal.
"We struggle to see how yet another 'me-too' co-operation with GM Europe on componentry will help address any of the fundamental issues," said Credit Suisse analyst Erich Hause.
The Financial Times report also said that Peugeot's chief executive, Philippe Varin, visited GM's headquarters in Detroit in January for a dinner of industry chief executives on the sidelines of the city's motor show.
A deal would require the approval of the Peugeot family, which still holds 30% of the company's shares, and because of the way those shares are structured, the family has 48.3% of voting rights among shareholders.
GM reported record annual profits last year of $9.2bn (£5.8bn), but its European operations made a hefty losses of $747m and GM is planning further costs cuts for the business.