Peugeot told to make concessions if it wants aid

France made clear today it is not prepared to provide aid to struggling carmaker PSA Peugeot Citroen unless it makes concessions that could include suspending dividends.

Industry Minister Arnaud Montebourg offered no specifics in an interview on Europe 1 radio, but was adamant that there must be a quid pro quo for Peugeot to get support.

"Our strategy is that public aid, which is part of what the automobile sector is requesting, will not be granted without concessions," he said.

Montebourg is preparing a support plan for the auto sector, including Peugeot. The euro zone's continuing economic slowdown has hit demand for vehicles across the region, plunging car makers into difficulties. A survey of French dealerships showed on Tuesday that car orders dropped by 16 percent in June, after a 10 percent decline in May.

Without detailing what concessions would be sought from Peugeot, Montebourg suggested that companies requesting help should not pay dividends.

The government has pressed Peugeot family members -- who control the company through a 25.2 percent stake commanding 37.9 percent of voting rights -- to explain why dividend payouts had continued amid a deepening crisis at Europe's second-biggest automaker.

The family has "a number of things to explain to us", Montebourg told lawmakers on Tuesday.

Peugeot said last week it planned to cut 8,000 jobs in France and close the Aulnay assembly plant near Paris in 2014 to stem mounting losses at the core manufacturing division, which is consuming 200 million euros of cash per month.

French President Francois Hollande, whose Socialist government won power in May with a promise reverse an industrial decline that has seen 750,000 jobs lost over the past decade, has called on the company to renegotiate the layoff plan.

Emmanuel Sartorius, appointed by the government to examine Peugeot's cutbacks, will meet chairman Thierry Peugeot on Friday, the company said.

Peugeot shares, which had fallen to new quarter-century lows since the cuts announcement amid concern the government would hamper restructuring, were 3.1 percent higher on Wednesday.

Friday's meeting between Thierry Peugeot and Sartorius will take place at its Paris headquarters, the company said. Sartorius was expected to report to ministers by the end of the month.

The auto industry support plan, to be unveiled on July 25, is likely to include help for environmentally friendly vehicles but no new car scrappage incentives.

A "cash for clunkers" programme launched in 2008 by former president Nicolas Sarkozy paid out more than a billion euros in sales subsidies on new car purchases, funded by the taxpayer.