Peugeot cuts more jobs as Sarkozy vows to help carmakers

By Caroline Jacobs and Gernot Heller

PARIS/BERLIN (Reuters) - A fresh round of job cuts at Peugeot Citroen underscored the auto sector's woes on Thursday as French President Nicolas Sarkozy vowed help for the struggling industry.

The European Investment Bank (EIB) is to pledge 2 billion euros (1.7 billion pounds) to help the struggling industry, according to a German government paper obtained by Reuters, but in the meantime auto sales are falling and manufacturers are retrenching.

PSA Peugeot-Citroen SA, Europe's second-biggest carmaker after Volkswagen in terms of European sales, said it planned to cut 2,700 jobs across its sites in France where it had a workforce of 114,000 in 2007.

It will cut a further 850 executive and professional positions at its Rennes site in western France, which makes mid-range and high-end vehicles, a segment in decline.

"The problem is linked to the current climate, but is structural too (at Rennes)," where the group makes the Citroen C5 and C6 models, a Peugeot spokesman said. Nine hundred workers from Rennes will also be redeployed to other sites.

The group forecast sales volumes for the market as a whole would drop 17 percent in the final quarter of this year in main European markets and by at least 10 percent in 2009.

Sarkozy said France would not leave large parts of the economy vulnerable to the economic crisis, picking out the car sector for special mention.

"I will not leave entire sectors unarmed in the face of the crisis. I am thinking about the automobile sector," he said in a speech on a visit to aerospace supply company Daher near Paris.