France may pump up to 6 bln euros into car industry

PARIS (Reuters) - France may pump up to 6 billion euros (5.5 billion pounds) of aid into the country's ailing car industry, but Prime Minister Francois Fillon warned on Tuesday that automakers would have to safeguard French jobs in return.

French government ministers, European Commissioner Guenter Verheugen and representatives of the French car industry met on Tuesday at a summit to discuss what can be done to help manufacturers survive a widespread sales slump.

Fillon said the government was considering making 5 billion or 6 billion euros available for the French car industry, which provides jobs for almost 10 percent of the country's workforce.

Measures would be announced in the coming days, he said.

Renault-Nissan Chief Executive Carlos Ghosn called for access to credit at reasonable rates and more EU funds for research into green technologies, and warned that 2009 and 2010 would be difficult and decisive for carmakers.

Christian Streiff, CEO of Europe's second-largest auto manufacturer PSA Peugeot Citroen, told the summit his company's financing needs added up to around 6 billion euros.

Tyre maker Michelin, however, said it did not need any state aid money. Hit hard by the global decline in car sales, it issued two profit warnings last year, but said on Tuesday that its debt financing needs were covered, for now.

"We have no urgent needs," Jean-Dominique Senard, managing partner and finance chief, told Reuters. "Our next debt repayment deadline (of 470 million euros in April) is already covered by bridge loans that allow us to refinance in a serene fashion,"

Promising a massive, fast financing effort to deal with the "emergency" it faced, Fillon reiterated that the state would not abandon the sector but warned that help would not come without conditions.

The French state has already 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.

With banks not lending to carmakers at normal interest rates, Fillon called on the European Commission to approve an aid package quickly, as Verheugen stressed the need to ensure U.S. measures for its own struggling car industry met World Trade Organisation rules.

Verheugen, who agreed that public sector intervention was "indispensable," added that nobody knew whether the worst of the financial crisis was over.

He said the Commission would carefully watch developments in the U.S. car industry, where the government has agreed to help the struggling "Big Three" Detroit manufacturers to ensure U.S. measures were compatible with World Trade Organisation rules, and did not disadvantage European players.

France does not expect the European Union to raise objections to the aid plan it is preparing for the sector, a senior official in President Nicolas Sarkozy's office said on Tuesday.

Renault's Ghosn called on Tuesday for united action across the EU region, where the car industry accounts for 2.2 million jobs directly, and 10 million more in related industries and services, in the face of a crisis he said would not be short-lived.

"The measures that have already been put in place could prove to be insufficient. In these conditions, a rapid, decisive and coordinated intervention from the European states is necessary," he said.

France's minister for European Affairs Bruno Le Maire told the summit that plans to harmonise French and German incentives for trading in old cars were being studied, as well as the possibility of an EU-wide scheme.

NO ILLUSIONS

Fillon said he had "no illusions" about lending conditions for carmakers improving soon, adding that about two months had passed since the head of Renault told him credit markets had seized up, and they were still frozen.

"I think all European governments share this opinion -- we will not wait. There is an emergency. We need a massive response on the automobile sector's financing," Fillon said.

Fillon put forward the idea of the European Central Bank becoming involved in providing assistance to Europe's carmakers but he said he had been advised that was not an option.

"A second solution would be for the European Central Bank to do what the central bank of the United States is doing. I am told that is not possible, that there are all sorts of reasons why it is not possible. Fine. Well in that case, states will do it, he said.

Industry minister Luc Chatel said on Monday the government could offer financial help to the industry in exchange for stakes in carmakers.

(Additional reporting by Matthias Blamont and Yann Le Guernigou, editing by Mike Nesbit and Rupert Winchester)