Peugeot and Citroen's owner is reportedly in talks to take over General Motor's Opel and Vauxhall brands.
While the PSA Group already works with GM on several projects within Europe, this latest deal would see a complete takeover of the European business and its UK arm.
If this deal, which is reportedly one of 'numerous strategic initiatives' being considered, goes ahead it could have a detrimental effect on Vauxhall's UK workforce, which consists of 4,500 employees in plants at Ellesmere Port and Luton.
In addition to these workers, Vauxhall employs 23,000 people in its UK retail network and 7,000 in its supply chain.
Should PSA take over Opel, it would take the position of Europe's second-largest carmaker (after Volkswagen) with a 16 per cent share of the European market.
Meanwhile, GM would exit the UK and Europe altogether.
PSA spokesman Bertrand Blaise is reported to have said: "PSA confirms that it is exploring a number of strategic initiatives with GM with the aim of increasing its profitability and operating efficiency, including a potential acquisition of Opel."
However "there can be no assurance that an agreement will be reached," the company added.
Unite union leader Len McCluskey expressed his worry about the potential takeover, and said he urgently wanted to talk with GM.
"My priority now is to speak to General Motors to seek immediate assurances for the UK plants and this loyal workforce," he commented.
"I'll also be seeking urgent conversations with the government, because everything must be done to secure our world-class automotive industry."
GM previously owned a seven per cent stake in PSA, which was sold in December 2013 for £250m after joint projects proved unsuccessful.
PSA was then forced to seek help from the French government and Chinese firm Dongfeng Motor, both of which now hold 14 per cent stakes in the group.