Struggling PSA Peugeot Citroen is considering an equity tie up with its Chinese partner, Dongfeng Motor, and has instructed two banks to carry out a study of the implications, according to local reports in France.

The favoured option appears to be Dongfeng acquiring a stake by subscribing to a capital increase in PSA Peugeot Citroen. General Motors, which has a 7% stake, may object to this as it may weaken its position in the alliance. 

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Another option being considered is for Dongfeng to take a stake in an emerging markets spin off, with PSA essentially transferring equity in selected emerging market companies in exchange for cash.

Either of these alternatives would represent a significant shift in power in the automotive industry from west to east.

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