PSA Peugeot Citroen and Mitsubishi met this week in Tokyo to negotiate a deal that may give the French carmaker a controlling stake in the Japanese company, two people familiar with the matter said to Bloomberg. Both currently work together in sharing vehicles, but this development looks set to create an alliance in the Renault-Nissan mould.

A transaction would involve share swaps. At least four scenarios are being discussed, with one proposal of Peugeot taking 51 per cent of Mitsubishi in exchange for $1.8 billion in cash and 18 per cent of Peugeot, although that plan didn’t win support, the sources added.

PSA may be suffering from peer pressure. VW recently bought into Suzuki, while Renault has a significant holding in Nissan. Mitsubishi may not be the perfect Asia bride though. Nissan is a much bigger company than the Lancer’s maker, with a bigger global footprint. Renault and it are jointly investing in India and Russia, markets with huge growth potential. Suzuki meanwhile, is the market leader in India and has annouced plans to add small-car production in emerging markets including Pakistan, Indonesia and Vietnam.

If the deal falls through, PSA will be the second European partner for Mitsubishi. Germany-based Daimler AG bought 37 per cent of MMC in 2000 and 2001, before exiting in 2004 after refusing to pour in more aid money.