The French state would consider taking a stake in PSA Peugeot Citroen , its budget minister said on Friday, hours after the struggling carmaker announced a 4.1 billion-euro ($5.49 billion) writedown.
Although Peugeot's charge was a non-cash one that does not affect the group's liquidity or solvency, the hit to its automotive assets reflected Europe's worsening market outlook.
Asked whether France might invest in Peugeot to support the carmaker, Budget Minister Jerome Cahuzac told BFM Television: "It's possible...This company must not and cannot disappear and we must do what it takes for this company to survive."
Shares of PSA were up 4.9 percent, at 6.16 euros, at 0832 GMT, with traders and analysts saying the size of the writedown was offset by the fact it was a non-cash charge and by speculation the state would support the company's capital base.
"The (writedown) measure will not hit cash flows, nor will it affect liquidity or solvency," a Paris-based trader said. "It does however show that the outlook for a recovery in the European market is more pessimistic than it was six months ago."
Any state investment in Peugeot would be a "last resort", newspaper Liberation said, citing unnamed sources.
Peugeot is one of the companies worst hit by Europe's protracted sales slump. It is cutting 8,000 jobs and closing a factory to stem losses approaching 200 million euros a month. The company has pledged to return to breakeven late in 2014.
The Paris-based company said the writedown did not affect plans to reduce cash burn by half this year or its earlier 3 billion-euro net-debt forecast for the end of 2012. ($1 = 0.7469 euros)
(Reporting by Lionel Laurent, Brian Love and Alexandre Boksenbaum-Garnier; Editing by Christian Plumb)