Spokespeople for Opel and the French government, which owns 14 percent of PSA, had no immediate comment.
PSA Group said in a statement Tuesday that it was exploring "numerous strategic initiatives" that would expand the existing cooperation between the two companies, and that an acquisition of Opel was one of them.
A PSA spokesman confirmed that the company was in talks with the USA carmaker to deepen their partnership.
PSA also said its chief executive Carlos Tavares planned to meet senior German officials, possibly including Mrs Merkel, in the near future.
Germany's IG Metall labor union and Opel's works council said they were caught by surprise with news of the potential sale of Opel to PSA, the maker of Peugeot and Citroen brand cars.
A combination would create a manufacturer with about 16 percent of the European vehicle market, pushing past Renault SA to become the region's second-biggest auto group after Volkswagen AG. By comparison, Renault's 2016 European sales totalled 1,496,394, helped by the continued success of it Dacia brand.
Vauxhall UK also has headquarters in Luton.
General Motors' European operations have been unprofitable for the past 16 years, with combined losses put at over $9.1 billion since 2009.
For GM, offloading Opel could mean giving up on the global sales volume race in which it is now ranked third behind Volkswagen and Toyota (7203.T), with just over 10 million vehicles delivered a year ago.
Peugeot itself came close to bankruptcy in 2013 following years of mounting losses.
"Peugeot, of course, have a significant French government involvement, so it's important that our government is involved and Greg Clark has made it clear that the government will be involved", Mr McCluskey said. Each paid over $1.1 million for their share of the company.
In 2010, the French auto maker's captured a 13.1 per cent market share in Europe. But while Peugeot's market share has been eroded though increase competition, its share price has more than tripled, placing it on a more solid financial footing that anytime in the past two decades.