GM-Peugeot setbacks set scene for Dongfeng deal push

"There's an awareness that the cash situation will not pick up in the way that had been set out," another person said. "The slight improvement we've seen so far cannot be sustained."

Peugeot, which had said it would beat its target of halving industrial cash consumption to 1.5 billion euros, will give a progress update when it publishes third-quarter revenue next week, a spokesman said, declining further comment.

Peugeot ended the first half with cash of 7.71 billion euros, excluding listed subsidiary Faurecia, and is set to consume about 2 billion this year as restructuring costs increase net industrial debt to 4.8 billion.

Together with 2.4 billion in undrawn credit lines, that will leave about 8 billion in available reserves - but the real cushion is closer to 5 billion because Peugeot needs the difference just to operate.

Peugeot's dependence on European sales and exposure to Mediterranean markets has made it the worst casualty of the region's auto slump, with a 5-billion-euro net loss last year.

The company, slashing jobs and plant capacity to pursue a return to profit in 2015, had announced plans for at least five joint vehicle and powertrain programs with GM soon after their alliance was unveiled last year.

The two carmakers have since held unsuccessful talks about a deeper combination.

Peugeot and GM are pushing ahead with joint purchasing, logistics and three programmes to develop small cars and two minivan families, for introduction in 2016 through 2018.

"We started out with about 40 potential projects," Peugeot programme chief Jean-Christophe Quemard said last month.

"There are things we would have liked to do but can't," Quemard said, citing technical incompatibilities between vehicle designs. "It's very frustrating and takes a great deal of time."