PSA Peugeot Citroen is seeking 11.5 billion euros ($14.9 billion) in refinancing for its struggling car loans division, the French automaker said on Wednesday as it reported a 3.9 percent decline in third-quarter sales.

Paris-based Peugeot said it was close to a deal with creditor banks and the French government to extend financing for its Banque PSA Finance lending arm and roll out a state guarantee of up to 7 billion euros for future borrowings.

Sales fell to 12.93 billion euros in the three months ended September 30 from 13.45 billion a year earlier, Peugeot said. Revenue from the core carmaking division dropped 8.5 percent to 8.52 billion euros.

"The competitive environment is getting tougher, with increased pricing pressure and ongoing deterioration in the markets of southern Europe," the company said.

Peugeot cut its full-year European outlook to predict a 9 percent market decline, worse than the 8 percent contraction forecast last month.

Peugeot added that talks with new alliance partner General Motors have settled on four joint vehicle programmes - two small cars, a compact crossover and a larger vehicle.

(Reporting by Laurence Frost; Editing by James Regan)