France steps in to rescue car manufacturer

Peugeot said it had agreed to appoint government and trade union representatives to its board, halt dividend payments to shareholders and stop awarding executives stock-option bonuses as part of a deal.

But Prime Minister Jean-Marc Ayrault hinted it might need to do more, saying: "My government has no intention of offering a gift without anything in return."

Peugeot has stated its intention of cutting over 10,000 jobs which the government may intervene to protect.

President Francois Hollande has previously slammed the company's cost-cutting programme as "unacceptable," while trade unions called it "a declaration of war."

Chief executive Philippe Varin said he was pleased with the three-year "refinancing" deal - but added that EU objections to such state intervention "can't be ruled out."

Bank BNP-Paribas also expressed concern about how the competition authorities in Brussels would react - especially as it may lead to pressure for intervention to save jobs elsewhere.

US car giant Ford told workers at its Genk plant in eastern Belgium today that it planned to close the factory by 2014, leading to 4,500 job losses at the site and another 5,000 among subcontractors.

Union rep Johan Lamers said the announcement had taken staff by surprise and was "an extremely bitter pill" as the company had assured them the factory had a future just a month ago.

Bosses were due to meet Belgian Prime Minister Elio Di Rupo and regional Flemish authorities to discuss the Genk site, which accounts for 30 per cent of the country's car production.

And the German state of Lower Saxony said it would demand that the EU vetoes the French rescue package as a breach of competition rules.

Lower Saxony is a major shareholder in Peugeot's rival, European market-leader Volkswagen.

EU Competition Commissioner Joaquin Almunia said France had not notified Brussels about the deal.

"Once we receive the information, we will have to conduct a very careful assessment of what's going on," he told Reuters.