France to Launch Plan to Aid Auto Industry

French President Francois Holland says the government will unveil a plan on July 25 to bolster the automotive sector, which will include incentives to spur vehicle purchases.

But Hollande insists France will not revive the scrappage subsidies it used to boost sales during the previous recession.

The program is at least partly in response to PSA Peugeot Citroen's announcement late last week that it would close a plant in Aulnay, France, and shed as many as 8,000 French workers a plan Hollande calls "unacceptable."

PSA CEO Philippe Varin declares that incentives would provide only a temporary fix. He is calling instead for big reductions in social charges that have caused France to have the "most expensive labor costs in Europe." Analysts note that neither incentives nor labor cost reductions would solve one of PSA's main problems: excess production capacity.

Hollande admits he can't halt PSA's plant to end production in Aulnay in 2014. But he says the government has unspecified means of "exerting pressure."