By Sarah Sloat

FRANKFURT--Combing General Motors Co.'s Opel unit with PSA Group makes industrial sense and would be an opportunity to create a strong European player, the head of Germany's Opel said Friday.

"This is a chance to create a European champion and to open a new chapter after 88 years as part [of] GM," Karl-Thomas Neumann said in a letter to employees.

Mr. Neumann said this week's talks with GM Chief Executive Mary Barra were constructive and that Ms. Barra had briefed the works council and labor union IG Metall when she visited Germany on Wednesday.

"All involved understand the industrial logic of the targeted transaction: this would be the second-largest European auto maker with a market share of 17%," he told employees.

The remarks were first reported by Germany's Bild newspaper and were confirmed by Opel. They came two days after Opel's management and workforce were caught off guard by news of a potential sale to PSA, the maker of Peugeot and Citroen cars.

If a sale went through, PSA would become the second-largest car maker in Europe after Volkswagen AG.

Opel employs about 38,000 people in Europe, with more than 19,000 of those in Germany. Peugeot employs 87,800 people in Europe and 95,700 world-wide.

Opel's work council and IG Metall said they saw advantages to the deal, but added that it must include a commitment to jobs and investments at Opel and its U.K. sister company, Vauxhall.

Write to Sarah Sloat at sarah.sloat@wsj.com

(END) Dow Jones Newswires

February 17, 2017 11:00 ET (16:00 GMT)