Peugeot Citroen secures government fundsContinue reading the main story
Carmaker PSA Peugeot Citroen has secured a 7bn euros ($9bn; £5.7bn) state guarantee for its finance division, Banque PSA Finance.
In return, the French government wants the carmaker to scale back its plan to cut 8,000 jobs and close a factory.
Peugeot is also close to securing 11.5bn euros (£9.3bn, $14.9bn) in new financing from its banks.
The carmaker reported a 3.9% fall in sales during the July to September quarter.
Peugeot's shares were down 4.7% by mid-afternoon, as the carmaker said it would not pay dividends while in receipt of government aid.'Getting tougher'
In July, Peugeot announced plans to cut 8,000 jobs in France and to close its plant in Aulnay outside Paris.
Government assistance is obviously welcome in the short term, but it is not a given that it will be beneficial for either workers or companies in the long term”
Last month, the company said it expected its European market share to shrink by 8% this year, but it has now revised this to a 9% fall.
Peugeot said: "The competitive environment is getting tougher, with increased pricing pressure and ongoing deterioration in the markets of Southern Europe."
It expects growth in other markets, however, including a 7% increase in the Chinese market, 5% in the Latin American market and a rise of 11% in the Russian market.
Peugeot is not the only carmaker suffering in Europe. Ford has said it is planning to close its factory in Genk in Belgium with the loss of 4,300 jobs.
Last month Ford had warned that it would be cutting jobs in Europe amid falling demand for motor vehicles.Political element
The French car sector is high profile and politically sensitive. Unemployment in France is over 10% and the government has emphasised the importance of industry jobs.
Both government and workers will have a seat on a Peugeot oversight board.
French Prime Minister Jean-Marc Ayrault said on the French radio station France Inter: "My government has no intention of just giving, of offering a gift without anything in return."
The move marks a return to state intervention which was last seen in 2008-09. Then the government gave 6bn euros to Peugeot to help it through the early stages of the financial crisis.
Also on Wednesday, Peugeot and its partner General Motors said they would develop a joint programme to make a small van for GM's Opel and Vauxhall brands.
They also said they would start work on developing a new, low-emissions small car and work together on vans and larger cars under both brands.
Peugeot Citroen was dropped from France's Cac 40 benchmark share index last month, in an embarrassing demotion for the company.
The carmaker was a founding member of the Cac 40, which was created 25 years ago.