Tokyo /Geneva: Japan’s Mitsubishi Motors Corp and France’s PSA Peugeot Citroen said they have decided against forming a capital alliance but would continue talking towards expanded business ties.

The two car makers had announced in December the start of talks to form a strategic partnership to build on existing project-based ties such as SUVs and electric cars, and Mitsubishi said a capital alliance could be part of that deal.

PSA was eyeing a 30-50% stake in Mitsubishi for up to ¥300 billion ($3.4 billion), a deal that would give the struggling Japanese automaker a much-needed infusion of capital, the Nikkei newspaper reported at the time.

Mitsubishi and PSA said in a joint statement on Wednesday that president Osamu Masuko and PSA chief executive Philippe Varin met at the Geneva motor show and confirmed their intention to expand operational ties but concluded that a capital alliance would not be realistic.

“There were conditions in terms of finance and value, etc. We met last night, we talked about it and we decided the conditions were not met," PSA chief executive Philippe Varin told Reuters on the sidelines of the Geneva auto show.

Mitsubishi needs a strategic partner to survive, while PSA wants global scale to become less reliant on stagnating European markets, where government subsidies are running out.

That Franco-Japanese alliance is also looking to lead the industry in the unproven electric car segment, where Mitsubishi Motors is among the only players to have such a car on sale.

“Although Mitsubishi has good technologies, it is negative news for the company to have lost a way to raise money," said Shigeo Sugawara, senior investment manager at Sompo Japan Asset Management.

Shares of Mitsubishi closed up 0.8% at ¥132 in Tokyo ahead of the announcement, outperforming a 0.3% rise in the benchmark Nikkei average.