REPORTS OUT OF France and Japan today suggest that Peugeot Citroen PSA is poised to buy a stake in Mitsubishi - perhaps as much as 30 to 50 percent.
Already Europe's second biggest carmaker and the world's eighth biggest, a merger between Peugeot and the Japanese company would make the merged entity the sixth biggest carmaker globally.
Mitsubishi is ranked seventh of Japan's eight carmakers on January-October sales numbers in 2009.
In 2008, combined sales for Peugeot and Mitsubishi reached around 4.45 million.
Both companies have confirmed they are in talks to build on their existing relationship.
"In the car sector there is overcapacity in the the world and in case of overcapacity there could be consoldation" France's Finance and Economy Minister Christine Lagarde told LCI television.
"That Peugeot and Mitsubishi have been talking to each other for a while is a good thing," she said.
The French carmaker will soon launch a Peugeot-badged version of the Mitsubishi i-MiEV electric car.
While Peugeot already has parts, platform and engine ties with Mitsubishi, Toyota and BMW, President Philippe Varin has said that he wants to turn the company into a more global carmaker.
Japan's Nikkei newspaper reported today that the two companies are in the final stages of negotiations, with Peugeot seeking a stake of more than 50 percent in Mitsubishi through the placement of new shares.
Fellow European carmaker Renault is expected to increase its production and development ties with Japanese partner Nissan, giving it greater opportunities with Nissan's Zero-Emission electric vehicle technology.
Mitsubishi is one of the few mainstream carmakers in the world with an electric vehicle - the i-MiEV - already on the market, and an alliance would instantly advance Peugeot's aspirations in the EV arena.