PSA Peugeot Citroen has warned governments that halting scrappage schemes could prove disastrous.
The group warned that it could lose two billion Euros (£1.7bn) this year, and have to scale back production in the fourth quarter of this year, if Europe-wide scrappage schemes start to be curtailed.
France was the first of the 12 European countries to launch a scrapping scheme as part of a six billion Euro (£5.1bn) car industry bailout, and will decide in January whether to continue. Many expect the government to reduce the 1000 Euro (£851) trade-in incentive in stages.
The German government, which has the most generous scheme, says it is 'weighing its options'.
Peugeot issued the warning at the same time as announcing a convertible bond issue of up to 575 million Euros (£489m).
PSA Peugeot Citroen recorded a 343 million Euro (£292m) net loss in 2008, said the capital raised from the bond issue would go towards “general financing needs”, development projects and the extension of the maturity of its existing debt.
Peugeot received a three billion Euro (£2.6bn) long-term loan from the French government in March and a 400 million Euro (£340m) four-year loan from the European Investment Bank in April.