The PSA Group is currently in talks with General Motors over the purchase of the latter’s European business, which makes cars under Opel and Vauxhall brands. The French company makes Peugeot, Citroen and DS cars; with Opel on board, it will be the second largest auto group in Europe after Volkswagen, overtaking Renault-Nissan.

PSA is “exploring a number of strategic initiatives with GM with the aim of increasing its profitability and operating efficiency, including a potential acquisition of Opel,” a spokesman confirmed. However, PSA added that there could be “no certainty over the conclusion of an agreement”.

GM may keep a stake in the enlarged entity, according to Reuters. The two groups have tried to forge an alliance before, but that ended in 2013 when GM sold its stake in PSA. Currently, both share production of light commercial vehicles and certain SUV models.

PSA, which is also looking at a stake in Proton, has rebounded from a 2013-14 brush with bankruptcy to reach record levels of earnings. Under boss Carlos Tavares, the group sold 3.15 million vehicles last year. Tavares has signalled openness to a tie-up that would increase PSA’s scale and ability to meet growing investment demands in vehicle electrification, driving technology and connected services, the report adds.

On the other hand, GM has struggled to make Opel profitable. Even last year, when European auto sales hit a new high since 2007, the German company failed to breakeven. GM previously tried to sell Opel to Canadian parts maker Magna in the aftermath of the financial crisis, but backed out of the tentative deal in 2009.

According to Reuters, GM selling Opel would be the most dramatic demonstration yet of CEO Mary Barra’s strategy of prioritising profitability ahead of market share. Since taking over the helm at GM in January 2014, Barra has signed off on decisions to quit markets where GM lost money (Russia and Indonesia), stop selling Chevrolet cars in Europe, and slash unprofitable sales to US rental car fleets just to prop up market share.