Sarkozy gives EUR 1.5bn boost to French car industry

(DOUAI) - President Nicolas Sarkozy on Thursday announced a 1.5-billion-euro (1.9-billion-dollar) boost for France's struggling car industry as part of a massive plan to help France resist the global economic slowdown.

"The state is prepared to do everything to save the car industry, which employs 10 percent of the French workforce," the president said in a speech in Douai in northern France, home to a major Renault car factory.

Sarkozy announced three key measures for the car industry, which accounts indirectly for 2.5 million French jobs, after tumbling sales forced national champions Renault and Peugeot to slash thousands of jobs.

To help car makers shift unsold stocks of close to a million vehicles, owners who scrap an old vehicle to buy an energy-efficient new one will receive a 1,000-euro bonus, a measure forecast to cost 220 million euros.

The French state will also provide a one-billion-euro loan facility to support the financial services branches of Renault and Peugeot.

And auto manufacturers will receive some 300 million euros in state aid for research and development and restructuring costs in the form of advances and loan guarantees.

With the Big Three US car makers seeking Congressional backing for a massive bailout, Sarkozy said their French rivals would have the state's full support.

"I believe in globalisation, I believe in free trade. But if our American friends were to do more to for their own industry, I would not let French carmakers suffer a competitive disadvantage."

But he also warned that state help would be conditional on pledges to keep jobs in France and to refrain from outsourcing operations.

The measures were part of a 26-billion-euro stimulus drive combining state infrastructure investments and measures to improve business cashflow, protect jobs and shore up France's vital car and construction industries.