France reacted cautiously on Tuesday to the idea of a tie-up between carmaker Renault, its Japanese partner Nissan and U.S. rival General Motors as Renault shares fell.

Industry Minister Francois Loos said in a television interview he welcomed Renault's efforts to pursue a global strategy, but also highlighted the pension deficit and other problems faced by GM, the world's biggest car manufacturer.

Meanwhile Renault's shares fell 2.55 percent to 82.05 euros in early trade, making them the biggest loser in France's CAC-40 index. In Tokyo, Nissan's shares ended slightly higher.

This has to be approached with enormous caution, Loos told i-Television.

The United States is an immense market, a complicated market and General Motors is in a difficult situation because of problems that have nothing to do with cars.

The French government held 15.33 percent of Renault and 18.78 percent of its voting rights as at the end of 2005, according to the company's annual report.

Renault and Nissan said on Monday they were ready to start talks on an alliance with General Motors Corp, provided the U.S. group asked them. Together the three companies would form a $100-billion global industry giant.

General Motor's board will meet on Friday to discuss a response, Bloomberg News said on Tuesday. A GM spokeswoman in Tokyo said she had no knowledge of the meeting.

However, French business daily La Tribune saw potential advantages for Renault in any deal.

GM's fall is such that its stock market value today is lower than that of Renault, which is only the 10th biggest automaker worldwide, the newspaper wrote in a commentary.

Renault could therefore obtain a seat at the top table and a gateway to the North American market. At first sight that appears to be a good deal, it added.

The car industry is littered with the corpses of alliances that did not work out as expected, including BMW and Rover, DaimlerChrysler's ties with Mitsubishi Motors and GM's own past links with Italy's Fiat.

But established players remain under pressure to consolidate to cut overcapacity and costs, face new competitors from places such as China and to respond to consolidation among suppliers like steel makers.

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