UPDATE 1-PSA says supplier base needs to consolidate

* PSA says giving 250 mln euros directly to suppliers in '09

* Part of wider moves totalling 2 bln euro contribution

(Adds detail)

By Marie Mawad

PARIS, Nov 6 (Reuters) - PSA Peugeot Citroen's (PEUP.PA) supplier network in France is burdened with 40 percent too much industrial capacity, its head of purchasing said on Friday.

Jean-Christophe Quemard told journalists around half of the supplier overcapacity in France was linked to the current climate, while half was "structural".

"The restructuring of the automobile sector must continue," said Quemard. "Shock absorbers have played their role," he said, referring to government help. "But it is not over. There is consolidation and restructuring work still to be done."

Suppliers have been hit hard by the crisis that struck the automotive industry late last year, sending car demand tumbling and forcing carmakers to slash production before governments stepped in with financial support for carmakers and suppliers as well as scrappage schemes designed to boost demand.

The group would inject over 2 billion euros ($3 billion) into the supply chain in 2009, including 250 million euros of direct aid to struggling suppliers, Quemard said.

Quemard said 1.3 billion euros of the total came from reducing payment times to suppliers to comply with new regulations.

In the first half, it made cash contributions of 160 million euros to suppliers in difficulty.

The group also contributed 200 million euros to a fund to help suppliers modernise, he added, and contributed 323 million euros to the recapitalisation of Faurecia (EPED.PA), in which PSA Peugeot Citroen owns a majority stake. [ID:nL3528760] [ID:nLA661979]

Speakers at this week's Reuters Auto Summit said suppliers were likely to consolidate. [ID:nL0460251] (Writing by Helen Massy-Beresford; Editing by David Holmes) ($1=.6734 Euro)