French auto sector struggles, government is preparing for action plan image

Car sales in France continue to fall sharply in June.

Peugeot, one of the largest carmakers in France is preparing to cut almost 10,000 jobs and may close one factory near Paris, after the company suffered a 10% decline in new registrations, which mirror sales, in June. That was far worse than the 0.9% contraction in the overall market, according to latest data from France’s auto makers’ association.

The French ministry for recovery of production said that it would present an action programme for the car industry, an important part of the French manufacturing base, in the next few days.

But the government will focus on promoting research and development rather than new state-sponsored incentives to buy cars, Labour Minister Michel Sapin said on Wednesday.

“It’s not just about boosting car purchases,” Sapin told BFM TV in an interview. “Nobody can say they have the solution … a magic wand,” he said.

Many of Europe’s manufacturers are losing money because their sales have fallen because of the severe sovereign debt crisis ravaging the region. This drop in sales has led to the problem of overcapacity, creating pressure on some of these manufacturers to shut down plants.

French and Italian manufacturers are considered to be particularly exposed while German high-end vehicle makers are suffering less.