Discussions have centred around sharing parts and vehicles, according to reports, rather than major capital deals. It's understood GM could assist PSA in expanding into China and Brazil and relying less on European sales, while PSA could assist GM in Europe where brands such as Opel are not doing too well.
A GM-PSA alliance could see vehicles, engines and other components being manufactured in Europe and shared between both companies, saving manufacturing costs.
Reports suggest Peugeot is looking to expand into other markets to reduce its reliance on Europe, where yearly sales dropped 8.8 per cent at the end of 2011. This could involve a return to the US, a market the French company hasn't been part of since 1992.
General Motors on the other hand, is looking to build sales in Europe. Last year the European arm of the company reported a loss of $747 million due, in part, to dwindling Opel sales. With PSA being the second-largest manufacturer in Europe, GM could use a helping hand.
An announcement is expected to be made on an alliance deal at the 2012 Geneva motor show, which kicks off on March 6.