General Motors and Italian automaker Fiat SpA earlier this year discussed combining their European operations, according to people familiar with the matter, an indication of how far Europe's struggling automakers are willing to go to deal with the region's mounting troubles.

GM CEO Dan Akerson and Fiat CEO Sergio Marchionne talked briefly about merging their European businesses, these people said. By the time they met, GM was well along its path with French automaker PSA Peugeot Citroen, and discussions never reached either company's board.

GM opted to stay the course with Peugeot, those people said, quickly ending the chance for a broad deal with Fiat, they said. GM and Peugeot last week disclosed a purchasing and development partnership that aims to save $2 billion in annual costs by 2017.

Fiat sought to convince GM that it was a superior partner to Peugeot, according to one person familiar with the discussions. In part, it believed a GM-Peugeot alliance would greatly reduce its chances of finding a partner in Europe. GM's Opel/Vauxhall unit and Peugeot are the two European automakers hardest hit by a sales slowdown in the region.

Fiat and Peugeot have an existing joint venture producing small commercial vans in Italy, and separately discussed an alliance in recent months, another person said.

Marchionne, GM Vice Chairman Stephen Girsky and a few other industry executives attended a dinner in Birmingham, Mich., on Jan. 9, on the eve of the Detroit auto show, although their conversation only touched on general industry topics. There was no discussion of any potential alliance.

The ultimately fruitless discussions between GM and Fiat signals the broad interest in the automotive sector to solving common problems through alliances, a change in tenor after several years in which most automakers worked separately to revive their operations.

GM and Fiat have an acrimonious history tied to a failed European deal in which GM had to pay Fiat $2 billion in 2005 to cut ties. A deal between the two might have helped speed the process on reducing overcapacity in the European market since executives at both believe cuts need to be made.

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