Dongfeng Might Buy Stake in PSA Peugeot Citroen image

China’s Dongfeng plans to buy a stake in PSA Peugeot Citroen, according to a state-backed newspaper.

“We have noticed some media reports but we won’t comment on this issue,” Dongfeng’s spokesman told AFP.

Last week it was said that the Peugeot founding announced that it is willing to give up control of the company in return for a new investment from GM. Now, according to an AFP report, Dongfeng, the second largest automaker in China, plans to buy a large stake in the struggling French automaker. Dongfeng is already Peugeot’s partner in China and Thierry Peugeot, chairman of Peugeot’s supervisory board, hopes that a deal with the Asian automaker will be reached.

“Both parties have been in contact for a period of time, but the content of the discussions is very complicated and the progress is slow. Currently there’s no sign indicating whether this issue can be finally concluded. Currently, the acquisition price hasn’t been decided. Besides that, the stake acquisition plan still needs approvals from the boards of both parties,” said an anonymous source.

PSA Peugeot Citroen is close to the end, as the European economy is still severely affected by the economic crisis, forcing the automaker to spend 3 billion euro in operating cash last year alone and shares dropping 77% in the past two years. The automaker has started to cut jobs, shelved the production plan at the Aulnay plant and was helped with a government bailout.