PARIS, July 22 French carmaker PSA Peugeot Citroen is in preliminary talks to sell part of its financing arm to Banco Santander or merge it with the Spanish bank's assets, the Wall Street Journal reported on Monday.
A deal would see Santander assume most of Banque PSA Finance's refinancing needs and would end the unit's reliance on 7 billion euros ($9.2 billion) in state guarantees, the newspaper said.
European Union antitrust regulators are investigating whether the guarantees comply with state aid rules and ensure its long-term viability.
Santander could own half of Banque PSA under one possibility, the newspaper said, adding that deals with other banks aimed at reinforcing Banque PSA's access to refinancing in some countries were also being discussed.
The carmaker was forced last year to negotiate a government-backed rescue for the Banque PSA financing arm after a series of credit downgrades hit borrowing costs.
Peugeot is one of the carmakers worst hit by the collapse of auto sales in austerity-hit southern European markets and has reacted to the crisis by cutting 10,0000 jobs and selling 2 billion euros in assets.
Peugeot was not immediately reachable for comment. Santander declined to comment.
($1 = 0.7611 euros) (Reporting by Alexandre Boksenbaum-Granier and James Regan; Editing by Mark Potter)