French state seeking advisor on Peugeot -report

PARIS, July 12 Fri Jul 12, 2013 3:07am EDT

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PARIS, July 12 (Reuters) - The French state is looking for an advisor bank to monitor struggling carmaker PSA Peugeot Citroen, with Bank of America-Merrill Lynch high on the list contenders, French daily Le Figaro said on Friday, without disclosing its sources.

The daily said the move shows that Peugeot is getting closer to sealing an alliance either with China's Dongfeng or U.S. producer GM, the French daily said.

The French Finance Ministry had no immediate comment on the report while PSA declined to comment.

Sources told Reuters last month that the French automaker's founding family has offered to give up control as it tries to revive plans for a closer tie-up with General Motors Co backed by a fresh capital injection.

Peugeot, one of the carmakers worst hit by the collapse of auto sales in austerity-strapped southern European markets, has responded to the crisis by cutting 10,0000 jobs and selling 2 billion euros in assets.

While the French government is domestic rival Renault's biggest shareholder with a 15 percent stake, it has no equity holding in Peugeot.

But the Paris-based carmaker 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, Peugeot had agreed to appoint a government-nominated board representative, former head of EADS Louis Gallois.

Any deal combining Peugeot 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 had said. (Reporting by Dominique Vidalon; editing by Patrick Graham)

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