Peugeot shares soar on reports of merger with GM's Opel

However, despite Neumann's plan, Der Speigel claims that even he was surprised at how advanced the talks were because GM had promised they would put his electric vehicle brand ideas to vote at board level by May.

Detroit-based GM has been trying to return its European business to profit.

However, global demand for diesel is in decline and therefore GM should be set to benefit from a potential split with Europe, Evercore ISI analysts said in a note.

The negotiations, confirmed on Tuesday, centre around plans for PSA to take a majority stake of General Motors' European subsidiary's Opel and Vauxhall in a deal that could have significant implications to the future of Holden.

German politicians are expressing concern about a possible takeover of General Motors' Opel division by France's PSA Group, maker of Peugeot and Citroen cars.

"There can be no assurance that an agreement will be reached".

This arrangement dates back to 2012, when GM took a 7pc stake in Peugeot as they formed an alliance in attempt to weather the then troubled European auto market.

More news: No changes to ACA at this time

"Within this framework, General Motors and Groupe PSA regularly examine additional expansion and cooperation possibilities, as well".

LONDON/FRANKFURT General Motors and PSA Group are in advanced discussions to combine the French carmaker with GM's European Opel business, two sources with knowledge of the matter told Reuters on Tuesday.

GM has not made a profit in Europe for more than 15 years. For instance, the upcoming Vauxhall Grandland X - a new C-segment SUV headlining Vahxuall's SUV boom - will sit on a PSA platform.

PSA also said its chief executive Carlos Tavares planned to meet senior German officials, possibly including Mrs Merkel, in the near future.

Any deal would have to overcome financial, industrial and political obstacles.

Together, PSA and Opel would command a 16.3 percent share of the European vehicle market share compared with Volkswagen's 24.1 percent, based on 2016 data. It would also see it overtake Renault, to place it second only to Volkswagen in terms of European sales reach.

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