Peugeot and Mitsubishi in partnership talks

TOKYO: A deal appeared in the works on Thursday for PSA Peugeot Citroen to take a stake in Mitsubishi Motors, giving the French auto maker access to the Japanese firm's green technology and Asian and US networks.

Both companies confirmed they discussed deepening ties, possibly in a capital alliance, after Japanese media reported Peugeot was eyeing a shares of 30 to 50 percent in the struggling company.

Analysts say such a deal would give Peugeot access to the advanced electric car systems of Mitsubishi, maker of the i-MiEV city car, as the global auto industry is shifting toward fuel-efficient and low-emission cars.

It could also open for the European car-maker to Mitsubishi's sales networks in emerging Asian markets and the United States, while helping the Japanese company, which posted a first-half net loss of just over 400 million dollars.

The deal, if it happens, would create the world's sixth-largest auto alliance with combined sales of roughly 4.45 million vehicles in 2008 -- behind Ford Motor of the United States but ahead of South Korea's Hyundai Motor.

In Paris, Peugeot acknowledged on Thursday it was talking to Mitsubishi about a potential strategic partnership.

"PSA confirms having started discussions with Mitsubishi Motors Company to jointly study possible ways to enlarge our relations, which could go as far as a strategic partnership," it said in a brief French-language statement.

Peugeot's chairman Philippe Varin -- who has said it is "essential" for the group to significantly raise its presence in emerging markets -- has indicated that he has not ruled out "capital alliances," a spokesman added.

In Tokyo, Mitsubishi spokesman Kai Inada said the auto makers, who have already cooperated in the past, are negotiating a deeper alliance, stressing that no agreement had been finalised.

"We are discussing possible projects that could be beneficial to both companies. A capital tie-up is one of the options," he told AFP.

Japan's Nikkei economic daily earlier said the companies were in the final stages of talks for Peugeot to possibly take over the Japanese company.

Mitsubishi would likely issue 200 billion to 300 billion yen (2.3 billion to 3.4 billion dollars) in new shares, giving Peugeot a 30-50 percent stake, the daily said, without citing its sources.

Mitsubishi and Peugeot have already been cooperating in vehicle supply and future joint production in Russia, said Inada.

In its statement, Peugeot said it has already jointly developed the all-wheel-drive Peugeot 4007 and Citroen C-Crosser vehicles with Mitsubishi, and that they had worked together on electric vehicles.

Analyst Mamoru Kato of the Tokai Tokyo Research Centre said both companies had a relationship and that "it would be good for them to make it deeper."

"Peugeot would gain Mitsubishi's environmental and other technologies as well as its networks in Asia," Kato said. "Besides Mitsubishi Motors' share price has been hovering low. It would be a cheap purchase."

Mitsubishi Motors shares surged 16 yen, or 13.45 percent, to 135 yen, on the news, easing from an intraday high of 146.

The Japanese automaker's current top shareholder is Mitsubishi Heavy Industries with a 15.17-percent stake. The firm and two other Mitsubishi group companies hold a combined interest of 34 percent.

A Peugeot deal would make Mitsubishi come under foreign control for a second time after DaimlerChrysler took a share in it in 2000.

Its stake had risen to as high as to 37.3 percent but DaimlerChrysler refused to participate in a massive bailout of the heavily-indebted Mitsubishi in 2004. It completely withdrew from Mitsubishi in 2005.