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Friday, January 23, 2009

France Prepares to Bailout their Automakers

PARIS — The French government is preparing to extend up to $8 billion in loans and loan guarantees to the country's troubled automakers and suppliers, notably Renault and PSA Peugeot-Citroën.

Before it can implement a formal rescue plan, France needs approval from the European Commission, according to the Financial Times. French President Nicolas Sarkozy is expected to announce details of the bailout in the next few weeks, the paper said.

In the meantime, the government is making $650 million available to the financing arms of the two French automakers. It may also provide credit guarantees, direct loans and other state aid.

The chief executives at the auto companies appear to be divided on the depth and severity of the crisis in France. PSA's Christian Streiff was quoted as saying the possibility of bankruptcy was "almost zero." But Renault's Carlos Ghosn said "it is the very survival of some manufacturers, suppliers and distributors that is at stake."

Inside Line says: Look for Italy, Spain and other European countries to follow suit with local auto-industry bailout plans of their own. — Paul Lienert, Correspondent