PARIS (Reuters) --The French finance ministry confirmed it was seeking outside advice on struggling PSA/Peugeot-Citroen after a French newspaper said the government had moved to appoint an investment bank.
The move shows that PSA is moving toward sealing a closer alliance with General Motors Co. or China's Dongfeng Motor, French daily Le Figaro said.
"As the guarantor of the BPF (PSA's finance arm), the government is closely monitoring the company's progress and is taking advice when needed," a finance ministry official said today.
Le Figaro said France has opened an advisory tender, which Bank of America-Merrill Lynch was well placed to win.
PSA's shares rose today to the highest level in more than a year on optimism the company may form an alliance and succeed in a turnaround. The stock has gained 31 percent in the last eight trading sessions. The stock set a 23-year low in 2012.
"The first-half sales weren't so bad, and the company seems to be getting its cash burn under control," said Sascha Gommel, an analyst at Commerzbank in Frankfurt. "There's also an expectation that Peugeot will move to find a partner."
Sources told Reuters last month that PSA's founding family has offered to give up control of the automaker as it tries to revive plans for a closer tie-up with GM backed by a fresh capital injection.
PSA is one of the carmakers worst hit by the collapse of auto sales in austerity-strapped southern European markets. While the French government is domestic rival Renault's biggest shareholder with a 15 percent stake, it has no equity holding in PSA.
Any deal combining PSA with GM's European Opel division would face major political hurdles because it would bring more factory closures and job losses in France and Germany, people with knowledge of the discussions have said.
Reports earlier this month said Dongfeng, PSA's joint venture partner in China, has held talks about buying a 30 percent stake in PSA. The talks were inconclusive and would anyway have taken too long, sources said. PSA dismissed the reports as "rumors."
The Peugeot family holds a 25.4 per cent stake commanding 38.1 per cent of voting rights in PSA.
PSA was forced last year to seek a state-backed rescue for its Banque PSA financing arm after a series of credit downgrades hit borrowing costs. In return for an 18.5 billion euro package including up to 7 billion in state loan guarantees, PSA had agreed to appoint a government-nominated board representative, former head of EADS Louis Gallois.
CEO Philippe Varin is seeking to stabilize the company by the end of 2014 after the carmaker consumed 200 million euros ($261 million) a month last year.
PSA's first-half vehicle sales declined 9.8 percent, chiefly because of the end of deliveries of ready-to-assemble component kits to Iran. Excluding those products, PSA's sales slipped 1.1 percent.
Bloomberg contributed to this report