France may pump €6 billion into car industry

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France may pump up to €6 billion euros (£5.58 billion) of aid into the country's ailing car industry, but Prime Minister Francois Fillon warned that automakers would have to safeguard jobs in return.

The head of Europe's second-biggest carmaker, PSA Peugeot Citroen, said in a newspaper that the state should not substitute itself for company management and investors.

French government ministers, European Commissioner Guenter Verheugen and representatives of the French car industry, which provides jobs for almost 10 per cent of the country's workforce, today met at a summit to discuss what can be done to help manufacturers survive a widespread sales slump.

Fillon said the French government was considering making €5 billion or €6 billion available for the industry. Measures will be announced in the coming days, he said.

Renault-Nissan Chief Executive Carlos Ghosn, calling for access to credit at reasonable rates and more EU funds for research into green technologies, said the crisis would not be short-lived, and warned that 2009 and 2010 would be difficult and decisive for carmakers' futures.

Promising massive, fast financing aid to deal with the "emergency" it faced, Fillon reiterated that the state would not abandon the sector but warned that help would not come without conditions. The French state has already insisted that carmakers safeguard French jobs.

"There is no question that the state should come to the aid of a manufacturer which would decide simply to shut one or more sites in France," Fillon said today.

With banks not lending to carmakers at normal interest rates, Fillon called on the European Commission to approve an aid package quickly, as European Commissioner Verheugen stressed the need to ensure US measures for its own struggling car industry met World Trade Organisation rules.

Verheugen, who agreed that public sector intervention was "indispensable," added that nobody knew whether the worst of the financial crisis was over, or whether more was to come.

He said the Commission would carefully watch developments in the U.S. car industry, where the government has agreed to help the struggling "Big Three" Detroit manufacturers.

Verheugen said the Commission would want to ensure US measures were compatible with World Trade Organisation rules, and did not disadvantage European players.

France does not expect the European Union to raise objections to the aid plan it is preparing for the struggling car sector, a senior official in President Nicolas Sarkozy's office said today.

No illusions

Fillon said he had "no illusions" about lending conditions for carmakers improving soon, adding that about two months had passed since the head of Renault told him credit markets had seized up, and they were still frozen.

"I think all European governments share this opinion -- we will not wait. There is an emergency. We need a massive response on the automobile sector's financing," Fillon said.

Fillon put forward the idea of the European Central Bank becoming involved in providing assistance to Europe's carmakers but he said he had been advised that was not an option.

"A second solution would be for the European Central Bank to do what the central bank of the United States is doing. I am told that is not possible, that there are all sorts of reasons why it is not possible. Fine. Well in that case, states will do it, he said.

Industry minister Luc Chatel yesterday said the government could offer financial help to the industry in exchange for stakes in carmakers.

PSA Peugeot Citroen head Christian Streiff said that 2009 would be "terribly difficult" and he could not say whether his firm would make a profit. he told Le Figaro in an interview published on Tuesday that the risk of a large European carmaker going bankrupt was close to zero.