Peugeot eyes tie-up with Mitsubishi as part of drive to be 'more global'

FRENCH carmaker Peugeot Citroën is in talks to take a major stake in Japanese peer Mitsubishi as the industry grapples with further consolidation.

The two firms yesterday confirmed they were "discussing various possibilities" including a possible capital tie-up.

Newspaper reports in Japan suggested the talks could lead to Peugeot effectively taking over Mitsubishi through the purchase of a 50 per cent-plus stake. The pair already co-operate in Russia, on electric cars, as well as developing four-wheel drive vehicles.

Peugeot's interest in Mitsubishi Motors, which is ranked seventh of Japan's eight carmakers by January-October production, is in line with the recent push by new chief executive Philippe Varin to create a more global car company.

Varin, who took the job in June, has said this could be achieved by various means, including alliances with other carmakers.

Both Peugeot and Mitsubishi have so far attempted to compete with bigger rivals through non-equity tie-ups, even as others sought deeper alliances to weather the slump brought on by the global downturn.

Among such moves, Italian Fiat has scooped up Chrysler, while General Motors, the other American car giant that filed for bankruptcy this year, is fielding interest for several of its brands, including Saab.

Peugeot Citron itself has operational ties with a number of other carmakers including Toyota and BMW.

Yasuaki Iwamoto, automotive industry analyst at Okasan Securities, said: "For Mitsubishi Motors, Peugeot would be the ideal partner.

"It would be tough for Mitsubishi to shoulder R&D costs for environmental technologies on its own and, if you look at the global auto industry, there is a limited pool of partners to choose from."

The most recent collaboration between the French and Japanese groups involves Mitsubishi supplying electric cars under French brands.

A spokesman for Peugeot, ranked eighth in the world by 2008 sales, would not comment on how long talks could last.

The carmaker will face increased competitive pressure from domestic rival Renault which is looking to capitalise on its long-term tie-up with Nissan, of Japan.

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

Shares in Mitsubishi yesterday closed up 13.4 per cent after earlier soaring 22 per cent.

French finance minister Christine Lagarde said: "In the car sector there is overcapacity in the world and there could be consolidation. That Peugeot and Mitsubishi have been talking to each other ... is a good thing."