GM, Peugeot to make small cars in Brazil: union

SOCHAUX, France (Reuters) - PSA Peugeot Citroen (PEUP.PA) and General Motors (GM.N) are working on plans to build small cars together in Brazil, a French union official said.

Under the tentative plan, confirmed by Brazilian unions, the allied automakers would pool production of two new models for Peugeot and Citroen and two for GM, Bruno Lemerle, of the CGT union, told reporters on Tuesday.

No decision has yet been taken on a production site, which could be an existing Peugeot or GM plant, or a new factory, Lemerle said.

Paris-based Peugeot had no comment on cooperation plans with GM, a spokesman said. Alliance working groups are scheduled to report back on joint programs in late October.

Under their alliance announced in February, which saw GM take a 7 percent stake in Peugeot, the two car makers aim to save $2 billion annually within five years from purchasing, logistics and joint development of new vehicles and technologies.

Moves to build a future generation of Peugeot and Citroen family cars on the same technical base as GM's Opel Insignia are also advancing, Lemerle said on Tuesday.

German media reported earlier this month that GM had backed away from tentative plans to share its mid-sized car technology with Peugeot, weakening the rationale for their alliance.

(Writing by Laurence Frost; Editing by James Regan)