A group of French workers have threatened to blow up their factory unless they receive a better pay-off for losing their jobs.

The 366 workers at the bankrupt New Fabris car parts plant in Chatellerault in eastern France have barricaded themselves inside the building and rigged up canisters of combustible gas.

They have already set light to equipment to show their determination to follow through on their threat.

Guy Eyermann, an official with the General Confederation of Labour (CGT) union, said on Monday: "Are we capable of blowing up the factory? Yes we are."

"These are serious threats."

The workers, who lost their jobs last month, are demanding $41,000 each in compensation from New Fabris' main clients Renault and PSA Peugeot-Citroen.

Firefighters brought in

Both Renault and PSA Peugeot-Citroen say they are not obliged to pay the workers.

Pierre Reau, New Fabris' director, said the firm was unable to pay more than $20,000 in redundancy to long-term workers. Junior staff could expect no more than $4,000, he said.

Extra firefighters have been brought in to the small town, while local officials have tried to play down the severity of the threat.

"We're in permanent contact with the people inside ... What we know from the factory director is that [the gas canisters] are empty," said Anne Frackowiak, an aide to the Chatellerault governor.