France nears deal to rescue Peugeot France is close to agreeing an effective bailout of PSA Peugeot Citroën, which would see the government providing between €5bn and €7bn of financial guarantees to the ailing carmaker's lending arm. The move would mark the biggest intervention by France's government in the country's car industry since 2009, when it extended Peugeot and Renault €6bn of low-interest loans to bolster their liquidity after the banking crisis. People close to the talks said the tentative agreement, which could be announced this week, had been reached after Peugeot agreed to appoint a workers" representative to its board, as well as a government-approved independent board member. However, it is not clear whether the government will be able to secure a reduction in the number of planned redundancies at Peugeot, which is struggling badly with plunging sales in its most important markets of France, Italy and Spain. Peugeot declined to comment on Tuesday. Arnaud Montebourg, the leftwing industry minister, had said in an interview with the Libération newspaper on Tuesday that he wanted to reduce by "at least 100" the number of planned redundancies at the company. However, Peugeot's restructuring plan, which envisages 6,100 redundancies in total, is still being examined by the company's work council, which reports back in November. As such, no decisions could be made on any reduction before that date. The French state does not own a stake in Peugeot - unlike its rival Renault - but it has been called in to offer guarantees to secure the financing of Banque PSA Finance, which funds Peugeot and Citroën dealers and car loans. Peugeot, which is cutting jobs and selling assets to stay afloat in a depressed market, saw its credit rating downgraded by Moody's this month from Ba2 to Ba3, three notches below investment grade. The move affected €5.6bn of Peugeot's debt and the rating agency warned of a negative outlook and possible further downgrade. A downgrade of Banque PSA Finance's division to "junk" status is expected soon, which would raise the rates Peugeot pays to borrow and thus the loan rates it can offer customers. French officials have said the plan was for private sector banks to inject funds into Banque PSA, with the state providing a guarantee. They have denied that it amounted to a state bailout of the company, saying that the rescue covered only the finance unit. A rescue for Banque PSA would need to be cleared by Brussels to ensure compliance with state aid rules with the European Union, which would set conditions for the support.