UPDATE 1-France eyeing aid for car sector- industry minister

Wed Jun 13, 2012 11:13am EDT

* Follows Renault COO call for scrappage scheme

* Salary cap of 450,000 euros at state-owned firms

By Nicholas Vinocur and Daniel Flynn

PARIS, June 13 (Reuters) - France's Socialist government is studying the possibility of providing further state aid to its struggling automobile sector as part of a broader push to shield its declining industries from job losses and a wave of factory closures.

In a bid to foster a greater sense of morality in the economy, the government announced the appointment of regional representatives to address "economic emergencies" and a salary cap of 450,000 euros ($560,600) for chief executives of public-controlled firms.

The prospect of state help came a day after Renault Chief Operating Officer Carlos Tavares called for the reintroduction of scrappage schemes or other state aid to lift demand in French and European auto markets.

"We are studying this idea, this proposal, and the automobile sector is undergoing a special examination here at the ministry," Industry Minister Arnaud Montebourg told a news conference on Wednesday, without providing details.

Montebourg, whose mandate is to protect and revive French industry after a decade of steep decline, said he had first discussed state aid when he met with Renault CEO Carlos Ghosn a few weeks ago, before he took office in June.

Renault is 15 percent owned by the French state.

Talk of restarting public aid coincides with a steep drop in sales for European carmakers, with France's Peugeot selling assets and slashing jobs to make up for slack demand and jitters extending even to Germany, hitherto a resilient producer which compensated for recession-hit southern neighbours.

When demand for cars dived during the global financial crisis in 2008, France launched a scrappage scheme that supported sales over two years at a cost of 1 billion euros.

Four years later, the government has far less room to manoeuvre, with public spending severely curtailed by budgetary constraints and debt markets wary of any deviation from a deficit-cutting trajectory.

Montebourg, at the head of a newly dubbed Ministry for Industrial Renewal, has pledged to work within these limits to arrest an industrial decline which has seen hundreds of factories close and 750,000 jobs destroyed in the past decade.

As he seeks to forestall a new wave of factory closures, Montebourg said he had appointed 22 regional representatives who would gather chief executives from struggling small firms with creditors and government officials to find ways of keeping them afloat.

"The difficulties we face are worse than during the (global financial) crisis," he said.

"Our idea is to bring everyone around a table and to make our companies, our industrial tools, a priority."

As part of the effort to promote "morality", Finance Minister Pierre Moscovici announced the salary cap, affecting some 50 entities and 70 senior managers.

"The prospect of earning 450,000 euros a year will not dissuade men and women of quality from applying," he said.

The measure would apply immediately in companies where the government owns a majority stake, including utility EDF , energy firm Areva, postmaster La Poste and rail operators SNCF and RATP.

For companies where the state owns a minority stake, such as Renault, with 15 percent, the government would advise boards to follow the same policy as for majority-owned firms.

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