Peugeot to be offered £10m to stay in UK

Ministers are preparing to offer Peugeot up to £10m in aid to secure the future of the French car maker's plant in Coventry. The offer is expected to be made to the chief executive, Jean-Martin Foltz, in a meeting penned in for after the election.

Peugeot is committed to producing its 206 model at the Ryton plant, which employs 3,000, until 2010. The plant's subsequent future will be decided early next year when Peugeot chiefs discuss whether to build a new model in Coventry.

In a meeting with union officials and MPs last week, it is understood that Jacqui Smith, a Department of Trade and Industry minister, pledged to "look sympathetically" on any aid application. The DTI will offer around £10m if the plant's future is guaranteed, said a source. This follows the failure of DTI attempts to safeguard MG Rover's Longbridge plant with a £100m loan.

"I have fears over Peugeot's long-term future in the UK," said Roger Maddison, national officer for the car industry at trade union Amicus. "The Government is pressing hard to find a rescue package for Ryton and we are hopeful it will be able to throw a few quid at the plant."

The DTI told Peugeot last month it could not spend a £14.4m government grant, for which it had been waiting for two years. This was prompted by Peugeot's decision not to build a successor to the 206, the 207, at Ryton.

A Peugeot spokesman said it was too early to discuss Ryton's future. But he confirmed that the DTI "has put in a request to meet and discuss a general range of subjects with us".

A DTI spokeswoman said: "Any new application by [Peugeot] for Selected Finance for Investment in England would be considered."