Any potential tie-up between U.S.-based General Motors and French auto maker PSA Peugeot Citroen likely would not go beyond technology-sharing, experts say, leaving the two auto makers to independently resolve their own workforce and production-capacity problems.

The two car companies reportedly are negotiating a strategic partnership.

“I can’t see them combining manufacturing bases; too many issues there with strong unions backed by the governments,” says Ian Fletcher, an analyst with IHS Global Insight in London.

Fletcher suggests talks would center on jointly developing items such as engines, transmissions and architectures for vehicles sold under their respective brands.

“There are efficiencies to be gained by this relationship,” he tells WardsAuto. “But the big issues with their workforces and production capacities will have to be solved independently.”

Both GM, through its European Adam Opel subsidiary, and PSA must shed employees and close manufacturing sites to survive in a sales market withered by weak consumer confidence amid a sluggish regional economy, industry insiders say.

Most also agree the industry in Europe has been ripe for downsizing for a number of years but auto makers have run into strong unions and government resistance to job losses.

GM’s bid to sell off Opel during its U.S. bankruptcy in 2009, and Renault’s attempt in 2010 to offshore some manufacturing, both were upset in part by works councils and politicians.

So far, neither GM nor PSA has confirmed they are engaged in negotiations.

GM says it “routinely talks with others in the industry, but has no comment beyond that.” PSA says it is “considering proposed cooperations and alliances” and that discussions are “ongoing,” but stops short of identifying any one auto maker.

Fletcher casts doubt on suggestions a manufacturing alliance outside of Europe would be on the table, because GM, Peugeot and Citroen each have their own ambitions in emerging markets such as India and China.

Auto makers in Europe are finding it increasingly tough sledding to sell cars in the debt-ridden eurozone.

European production in 2011 tumbled 18.9% compared with 2007, the last year of normalized manufacturing levels before the global recession, WardsAuto data shows. Opel/Vauxhall builds plunged 31.4% in the timeframe, while PSA production fell 10.6%.

Light-vehicle sales across Europe were down 13.8% last year compared with 2007.

The persistent economic downturn has weakened the financial condition of the region’s auto makers, with Opel losing E528.2 million ($700 million) in 2011 after earlier expectations its 2010 restructuring would leave it at breakeven for the year.

GM Chairman and CEO Dan Akerson said last week the auto maker would combine cost-cutting efforts and to better align production with demand to fix Opel. PSA has pledged much the same after 2011 operating income from its automotive business swung to a loss of E92 million ($121.9 million) from an operating profit of E621 million ($823.2 million) in 2010.

Dave Cole, chairman emeritus of the Center for Automotive Research and chairman of Auto Harvest, both in Ann Arbor, MI, does not expect cooperation between Opel and PSA beyond technology-sharing, but warns the industry has entered a regulatory-driven period where “everyone is talking to everyone” over ways to trim costs.

“It’s expensive to do anything,” he says, citing fuel-saving advanced transmissions now costing as much to develop as an engine.

Cole says a recent collaboration between Ford and GM on 6-speed automatic transmissions saved each auto maker “millions of dollars” and brought it to market one year ahead of time.

With fuel-economy and emissions rules now tightening globally, auto makers are pursuing a variety of avenues to meet the standards.

“The problem is we don’t know the answers,” he says. “It could be hybrids, diesels, EVs. So everyone is trying to work on everything. I suspect you’re going to see a lot of collaboration.”

Recent history shows any collaboration deeper than technology-sharing often ends badly. GM’s mash up with Fiat during the last decade ended with the Italian auto maker receiving billions from GM to sever ties. PSA recently failed to reach a strategic partnership with Mitsubishi.

However, technology-sharing agreements have proved more palatable, giving auto makers greater scale and efficiency without combining operations too deeply.

GM operates a number of joint ventures and cross-supply agreements worldwide.

PSA’s numerous partnerships include co-development of small engines with BMW and diesel engines with Ford, as well as the recent launch of an electric vehicle with Mitsubishi.

jamend@wardsauto.com