French car industry to get $10bn

Renault Trucks, which is owned by AB Volvo of Sweden, is to receive $650m, while Renault and Peugeot Citroen’s financial services divisions will get state aid of $2.6bn.

Falling car sales

Sarkozy said the package, which still needs the go-ahead from European competition authorities, was essential to protecting French industry and jobs from the slowdown.

He said France’s two leading car manufacturers had made a commitment “to close no sites over the duration of the loan and to do everything to avoid redundancies,” in exchange for the aid.

Since the start of the global financial crisis, which has sent car sales tumbling, both Renault and Peugeot have slashed output at their plants and hundreds of workers have accepted redundancy offers.

Both Peugeot Citroen and Renault, which together directly employ some 140,000 people in France, confirmed that they had committed to holding on to their French sites and staff.

Over the next two years, Peugeot Citroen said it would launch one or two new models in each of its five French assembly plants, and would step up investment in energy-efficient technologies.

Renault said it would not lay off staff in any of its French plants in 2009.

‘Acute crisis’

Sarkozy has said the measures would ensure that “an acute but temporary crisis will not destroy part of our industrial base and our auto industry skills”.

“We want France to have an industrial sector, we want France to have an automobile industry and we want to keep production capacities on French soil,” he said.

“We have no choice. Either we allow our industries to keep on leaving, or we react with all means necessary.”

The announcements came as Nissan, Renault’s international partner, announced it was to cut 20,000 workers worldwide and pull out of a joint project with the French firm in Morocco, where they were due to open a large plant.

Sarkozy has made protecting France’s iconic industries the central plank of his supply-led plan to ride out the global economic slowdown.

Speaking at the Elysee Palace he said he did not rule out taking similar action for other “major industrial sectors,” to ensure “the competitivity of our country,” naming the timber industry as an example.

But the French leader will have to tread carefully to avoid triggering a row over protectionism.

Last week, he angered eastern European governments by suggesting in a television interview that Peugeot should close a plant in the Czech Republic and bring production home to France.

Neelie Kroes, the Europan Union competition commissioner, has warned Paris against tying protectionist strings to its industrial aid efforts.