(Reuters) - General Motors Co. and alliance partner PSA/Peugeot-Citroen have halted talks on a deeper tie-up amid misgivings about the French carmaker's worsening finances and government-backed bailout, people familiar with the matter told Reuters.
The companies, already pursuing an operational partnership announced in February, had also been exploring a full combination of PSA with GM's European unit Opel, which is based in Germany.
But two sources with direct knowledge of those discussions said they were broken off after PSA accepted a state guarantee for its lending arm last month and announced a further deterioration of its cash position.
The automakers have agreed to a "pause" in early-stage talks on a Peugeot-Opel deal, said one of the sources. The government bailout is "sabotaging the plan," he added.
"They now consider that any deeper tie-up is unlikely before 2014, when the market picks up," another source said.
"The government bailout conditions rule out French job cuts, which means a deal can't happen any faster," he said. "It would be politically impossible to have all the cuts falling on the German side."
A PSA spokesman said there were no Opel tie-up talks currently in progress, breaking a month of silence since they were first reported.
"There are no such discussions underway," the spokesman said, declining to comment on past conversations. GM had no comment, a company spokesman said.
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