By on November 13, 2012

General Motors and PSA have put the brakes on talks regarding a broader alliance after PSA accepted financial assistance from the French government to help its ailing financial situation.

Reuters reports that

“Two sources with direct knowledge of those discussions said they were broken off after Peugeot accepted a state guarantee for its lending arm last month and announced a further deterioration of its cash position.

The automakers have agreed to a “pause” in early-stage talks on a Peugeot-Opel deal, said one of the sources. The government bailout is “sabotaging the plan”, he added.”

One of the key sticking points is a stipulation by the French government that mandates no domestic job cuts for PSA. Job losses that came exclusively from GM’s Opel division would be politically unacceptable in Germany, leading to a stalemate in terms of a deeper alliance that would see jobs cut and plants closed as a consequence of sharing technology and production capacity.

The government funds may have also caused PSA to change its tune on the alliance with Opel. Remarks made by the French Industry Minister included suggestions that Peugeot “measure…the consequences for our country” when it came to shacking up with an auto maker, and called on PSA to preserve French jobs and assembly plants.

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