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Talks between alliance partners General Motors and PSA Peugeot Citroen on combining brands have stalled, as the French company accepts a government bailout amid deepening financial difficulties.

Further to the official formation of the alliance on February 29, and a shared vehicle platform plan announced in October, the two manufacturing groups had been exploring the possibility of combining Peugeot with GM’s European brand Opel.

Opel Astra OPC

But Reuters reports two sources say discussions have been paused following Peugeot’s announcement of a worsening financial position and to accept a state bailout from the French government.

According to one source, both car makers agreed to a “pause” in Peugeot-Opel talks, adding, the government bailout is “sabotaging the plan”.

Another source told the publication that a coming together of the two brands would mean more plant and staff cuts for both Peugeot and Opel and that “the government bailout conditions rule out French job cuts, which means a deal can’t happen any faster.”

Peugeot 208

Both Peugeot and GM deny any talks have been under discussion.

The report says Peugeot is losing 160 million euros ($196 million) per month, while GM is predicting European losses of US$1.5-1.8 billion ($1.45-1.73 billion) this year.

The turbulent times in Europe have already seen an impact on Opel, Peugeot and in recent days, Porsche.