PARIS French President Francois Hollande said on Saturday Peugeot must renegotiate a plan to lay off 8,000 workers to lessen its social impact and accused the carmaker of lying over its intentions and making serious strategic errors.
In a television interview, Hollande said a government rescue plan for the ailing car sector due to be announced on July 25 would include public incentives to encourage consumers to purchase French-made, environmentally friendly cars.
He ruled out, however, a return to the scrappage subsidies introduced in the 2009 financial crisis by former conservative President Nicolas Sarkozy, which he said had cost the taxpayer dearly and had often been spent on foreign-made vehicles.
However, he admitted he could not halt Peugeot's plant to stop production at the Aulnay assembly plant near Paris in 2014.
Hollande, who won power in May with a promise to tackle high unemployment and halt France's steady industrial decline, acknowledged Peugeot (PEUP.PA) had economic reasons for making the cuts.
The company said last week its manufacturing arm is losing 200 million euros ($244.88 million) a month.
"However, the plan in its current condition is not acceptable. It must be renegotiated," Hollande said, adding he wanted to make sure voluntary redundancy packages or new jobs were found for all workers. "We want to open discussions so that there are no straight firings at Peugeot."
Peugeot has so far said it will find jobs within the group for 1,500 of the workers concerned, with a further 3,600 workers offered voluntary redundancy until 2013.
The Peugeot announcement came as Hollande faces scrutiny over billions of euros in tax rises to hit a deficit target this year - with the prospect of worse to come in 2013 - and struggles to fulfill a campaign pledge to bring down France's highest unemployment rate in 12 years.
The shock announcement from Europe's second-largest carmaker last week revived memories of former Socialist Prime Minister Lionel Jospin's failure to halt Renault's (RENA.PA) closure of its Vilvoorde plant in Belgium after winning power in 1997.
Jospin's admission "the state cannot do everything" is credited with helping to sink his 2002 presidential bid.
"The state will not stand idly by," Hollande said, asked if his government would follow Jospin's route.
Hollande said the government had means of "exerting pressure" and could provide credit to ensure Peugeot stuck to its commitment to see Aulnay remains an industrial site.
He dismissed a call from Peugeot Chief Executive Philippe Varin for the state to cut the heavy social charges weighing on labor costs, which the executive said made manufacturing uncompetitive.
"It's too easy to blame labor costs. There were bad strategic choices," Hollande said. "There were delays in taking difficult decisions and shareholders who were too hungry for dividends when investment should have been the priority."
Hollande's government has said it will consider steps such as lowering social charges on labor as part of a competitiveness review headed by former EADS EAD.PA Chief Executive Louis Gallois due to be completed in October.
That will come too late, however, to defuse the current crisis in the car sector.
The president accused Peugeot of misleading public opinion by concealing its plans until after presidential and legislative elections in May and June. A company spokesman declined comment.
"There was both a lie - this plan was not announced although it was already on the agenda - and a deliberate delay until after the elections," Hollande said.
Prime Minister Jean-Marc Ayrault will announce incentives on July 25 for buying French vehicles as part of a package to support the sector, Hollande said.
"In France, we have an industry which has taken the lead in making clean vehicles and hybrid vehicles. We should make sure these type of vehicles have the advantage," he said.
State and regional governments would buy these vehicles to give them a boost, Hollande said, while credit would be made available for research to boost industrial innovation.
"We will create a plan which costs as little as possible to the taxpayer and is as effective as possible," said Hollande.
($1 = 0.8167 euros)
(Additional reporting by Gilles Guillaume, Julien Ponthus and Gerard Bon; Editing by Sophie Hares)