PARIS, Feb 22: Leading French carmaker PSA Peugeot Citroen is in talks with US giant and world number one General Motors on forming a "strategic partnership," French Labour Minister Xavier Bertrand said on Wednesday.

Bertrand said Peugeot chairman Philippe Varin had told him the deal would allow the French group to cut its production costs but he would not be drawn on whether the plan was for a full merger or a simple alliance.

The minister said the talks were broadly good news but that his government was seeking assurances French jobs were safe. President Nicolas Sarkozy is seeking re-election in nine weeks and Peugeot is a major French employer.

The French state helped bail-out both Peugeot Citroen and its rival Renault during the recession that followed the 2008 credit crunch but does not hold a stake in the group. It will nevertheless watch the talks closely.

"The government does not interfere in decisions taken by big private groups but obviously we're watching the situation at PSA closely because it concerns French industrial strategy and jobs," said Budget Minister Valerie Pecresse.

Peugeot confirmed overnight it was in talks with other carmakers, without identifying GM, and the business daily Les Echos said the two groups were planning to announce their alliance at the Geneva motor show next month.

"In the context of its globalisation strategy and improving its operational performance, PSA Peugeot Citroen looks at potential cooperations and alliances," the firm said in a press statement.-AFP