Could another French-Japanese automotive alliance be in the offing?

In the shadow of the successful Renault-Nissan Alliance, France's other major carmaker, PSA Peugeot Citroën, and Japan's Mitsubishi Motors Corp. have become well-acquainted after working together on small ventures.

Paris-based Peugeot and Mitsubishi have developed SUVs jointly for the European market, they are planning to build vehicles together in Russia, and they are teaming up on electric cars.

On Friday, the chief executives of the two companies, Mitsubishi's Osamu Masuko and Peugeot's Philippe Varin, signed an agreement in Paris to develop electric cars for the European market based on Mitsubishi's battery-powered i-MiEV.

Their meeting fanned already strong speculation that the two companies might expand their cooperation.

In recent years, the Peugeot group has been eager to form ventures -- and did with Renault SA, Ford Motor Co. and Fiat SpA.

But, until recently, it would not consider deeper relationships. Peugeot had struggled to integrate the ailing Citroën carmaker in the 1970s.

Two years ago, however, Peugeot revised its stance and signaled a willingness to consider alliances.

Meanwhile, Mitsubishi has been on its own since 2005, when Daimler AG, then DaimlerChrysler, sold its shares as the German automaker unwound the global empire it had created.

Varin, a former top steel executive who became CEO of Peugeot in early June, said in July that the French carmaker needed to grow and was open to alliances.

Peugeot sources say their managers work well with those of Mitsubishi and the ventures have progressed smoothly.

The French company has been encouraged by the good relationship between its cross-town rival Renault and Nissan Motor Co.

The Renault-Nissan alliance formed in 1999 is one of the rare successes among cross-border deals, said Gerald Meyers, a business professor at the University of Michigan and former chairman of American Motors Corp. "Somehow they've been able to hold that thing together," he said.

The French business newspaper La Tribune reported on Friday that Peugeot was actively considering an alliance with Mitsubishi, without citing sources.

Rumors have linked family controlled Peugeot with BMW and with Fiat.

Peugeot is essentially a regional player, generating two-thirds of its annual sales of 3.3 million vehicles in Europe. Mitsubishi, a smaller company selling about 1 million vehicles a year, is reliant on the Japanese market and has a tiny presence in the United States.

Together, Mitsubishi and Peugeot would create an entity with annual sales of 4.3 million vehicles -- roughly the size of the Hyundai-Kia group -- and a presence in most major markets.

Their technological strengths are complementary: Peugeot is a leader in diesel technology, while Mitsubishi has moved quickly to develop an electric car, the i-MiEV launched in Japan in June. Mitsubishi showed the car at the North American International Auto Show earlier this year and plans to sell it in the United States.

According to a joint statement issued Friday, Mitsubishi and Peugeot have agreed to develop Peugeot and Citroën-badged versions of the i-MiEV for the European market and plan to start producing them next year.