General Motors and PSA/Peugeot-Citroen have penned an agreement to merge their future European small car development program, as well as focusing efforts on building a fuel-efficient, high performance small-displacement gasoline engine.

The brands have abandoned plans to jointly develop a midsize car, but instead will focus on a compact crossover (marketed by both Peugeot and GM), a subcompact multipurpose vehicle (for PSA and Opel/Vauxhall) and a low-emission subcompact global platform for both companies.

As Automotive News (subscription required) explains, the jointly-developed engine is expected to be based on PSA’s EB three-cylinder gasoline engine, available in 1.0-liter and 1.2-liter variants and currently used in the Peugeot 208.

While the new announcement pleased some analysts, skeptics pointed out that the GM and PSA alliance, announced last February, has so far shown more disappointment than progress.

Plans to jointly-develop a small car platform for the Latin American market have been abandoned, and a proposed dual-clutch gearbox design has also been scrapped.

An update on the status of the alliance is promised next month, and both automakers have agreed to consider “exploration of product and industrial initiatives in Latin America or other growth markets.”

It’s the “other growth markets” comment that draws our attention, of course. Could such an alliance eventually extend to Peugeot’s re-entry into the U.S. market? Color us hopeful, if not entirely optimistic.


Follow GreenCarReports on Facebook and Twitter.