France will put 'a lot of money' into car industry

France will put "a lot of money" into aid for the struggling car industry, President Nicolas Sarkozy said.

Mr Sarkozy, speaking in the east of France after a visit to a PSA Peugeot Citroen, said the state would do all it could to make sure the industry came out of the crisis stronger than before.

"We are working with the car sector, carmakers and their suppliers, to get out of this situation and to finalise a plan by the end of January," Mr Sarkozy said.

"That means that we will be ready to give the necessary support, in the form of loans or guarantees, to compensate for the blockage in the financing of companies ... but we will clearly ask them for an end to offshoring, and even the reinforcement of their activities in France," he said.

Tomorrow the government is due to meet car industry representatives and detail a plan to help in the face of a big drop in sales due to the economic crisis and credit restrictions.

"We can't leave our automobile industry to founder because it would take with it half of the French industry," he said, referring to electronics, glass, steel, plastics and other businesses supplying the auto industry. He said he was surprised France, which has two big vehicle makers, had become a net importer of cars.

European new passenger car sales fell 17.8 per cent year-on-year last month, the sharpest fall for 15 years, industry association ACEA said.

Peugeot and Renault - which both have financing arms - have stressed a need for access to adequate financing, with Renault's head of sales Patrick Blain saying last week the group has financing needs of around €9 billion per year.

Executive vice-president for autos of the Peugeot brand, Jean-Philippe Collin, said that with around 70 per cent of vehicle sales financed by credit the group's financing needs were "significant".

Governments across Europe have pledged their support for an industry that employs 2.2 million people directly in the region, as well as a further 10 million in related industries and services.

In France, Europe's fourth-largest market according to data from manufacturers' association CCFA, the government is expected to announce further measures to support the flagging industry at the summit on January 20.