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France may pump up to $7.8 bln into car industry

  French Prime Minister Francois Fillon said on Tuesday the government may pump up to €6 billion ($7.79 billion) of aid into the ailing car industry, but warned automakers would have to safeguard jobs in return.

French government ministers, European Commissioner Guenter Verheugen and representatives of the French car industry, which provides jobs for almost 10% of the country’s workforce, met on Tuesday 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 €5-6 billion available for the industry. Measures will be announced in the coming days, he said. Renault-Nissan CEO 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.

Fillon reiterated that the state would not abandon the sector and that it would quickly provide financial aid. He pledged a “massive" effort but warned that help would not come without conditions. The French state has 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 on Tuesday.


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 US 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 Organization rules, and did not disadvantage European players. Industry minister Luc Chatel said on Monday the government could offer financial help to the industry in exchange for stakes in carmakers.

In response to the crisis, the French government has already introduced a scrapping incentive for consumers trading in old vehicles, a €300 million fund to help restructuring among small subcontractors, as well as €1 billion ($1.33 billion) in guarantees for RCI Banque and Banque PSA Finance -- car manufacturers’ financing arms.

The chief executive of Europe’s second-biggest carmaker, PSA Peugeot Citroen, said that 2009 would be “terribly difficult” and he could not say whether his firm would make a profit. Christian Streiff told Le Figaro in an interview published on Tuesday in the newspaper that the risk of a large European carmaker going bankrupt was close to zero. (Reuters)