Still, GM Europe failed to break even in 2016.
The negotiations with Peugeot are understood to have involved Detroit-based GM executives, without any input from GM Europe officials.
German ministers will discuss the deal with the French government in an effort to limit the potential impact on German workers, Chancellor Angela Merkel's spokesman said.
A deal would transform PSA Group into Europe's second-largest carmaker with a 16% share of the European market and see GM exit United Kingdom and Europe.
France's PSA Group, maker of Peugeot and Citroen cars, says it's exploring a "potential acquisition" of Opel, the money-losing European business of General Motors Co. It means the biggest auto industry merger or takeover since Fiat bought Chrysler at a knock-down price from the U.S. government in the wake of the global recession, and it's likely to trigger a major round of mergers and acquisitions in the vehicle world, with smaller brands vulnerable to buyout.
If successful, the takeover would see PSA group become the second largest European auto manufacturer behind Volkswagen in the European new vehicle market.
PSA's shares also liked the news. The combination would be second only to Volkswagen, with 23.9 percent, and would vault ahead of the Renault-Nissan alliance, which had 13.9 percent.
GM has been particularly active in recent years in seeking a broad-based co-operation with Peugeot in a bid to cut costs and improve profitability at Opel and Vauxhall. One scenario already raised by General Motors sources in discussions with Autocar is the possibility of a sweeping consolidation of Vauxhall operations in the United Kingdom, with the brand name resigned to history and being replaced by Opel - a move that was seriously considered by General Motors following the financial crisis of 2009 but ultimately decided against. It had hoped to reach break-even by now, but last year posted a loss of $257 million for the year.
Peugeot - which also controls the Citroen marque - is part-owned by the French government, which holds a 14pc stake after a state bail-out deal.