Paris/New York: General Motors Co is in advanced discussions to buy a small stake in French automaker PSA Peugeot Citroen as part of their proposed strategic alliance in Europe, sources familiar with the situation said on Monday.

Under the terms being discussed, GM would likely buy a stake of less than 5% in Peugeot, the sources said. A deal could be announced in the next few days, although sources warned that no deal has been reached and talks could still fall apart.

A GM spokesman declined to comment. A Peugeot spokesman did not immediately return calls and messages seeking comment.

GM and Peugeot are discussing a broad strategic alliance designed to stem losses in Europe and cut production costs elsewhere, people familiar with the matter told Reuters last week.

The General Motors (GM) world headquarters. AFP

Opel, which GM opted to keep in 2009 when then-CEO Ed Whitacre scotched a planned sale, is one of the key concerns for GM investors. Last year, GM lost $747 million in Europe and Morgan Stanley analysts value Opel at negative $8 billion.

GM vice chairman Steve Girsky has taken charge of the Opel restructuring, and GM said this month that it would detail further steps soon.

Analysts said an alliance with Peugeot would allow the companies to pool together resources to develop vehicles. But they added that it could take a decade to fully realize the benefits of the pact and more steps would be needed to overcome the core problem for both automakers in Europe: overcapacity.

“Frankly we believe it will introduce complications at a very delicate time in its own restructuring," Guggenheim analyst Matthew Stover said last week.

“In the grand scheme of things, GM has much more to offer PSA than the other way around."