PSA Peugeot Citroën and Mitsubishi Motors have abandoned plans to form a partnership that would have seen them acquire stakes in each other, reports the Financial Times.

The two carmakers stated that they have "concluded that a capitalistic alliance was not appropriate in the current circumstances”.

They still planned to broaden co-operation in areas where they already work together.

Philippe Varin, chief executive of Peugeot, said in Geneva that his company had decided not to buy a stake in Mitsubishi for fear that the move would damage its credit ratings.

“I was always clear about our conditions,” Bloomberg quoted Mr Varin as saying. “In terms of our debt and our borrowing power, the priority has to remain our financial health.”

Peugeot and Mitsubishi jointly produce sport utility vehicles and electric cars, and are building a manufacturing plant in Russia.

In December, Peugeot said that alongside a capital tie-up, the two companies were also considering sharing vehicle platforms or working more closely in parts procurement or sales.