Peugeot plunges into the red, to slash stocks

Europe's second-biggest carmaker, along with its peers, is facing a worldwide car crisis and struggling to cut inventories of unsold vehicles in the face of falling sales as the credit crunch stifles consumer confidence.

Financial analyst had expected a net profit of some 180 million euros.

"We must concentrate all our efforts on reducing inventory and minimizing our cash consumption" CEO Christian Streiff said in a statement on Wednesday.

He added the group aimed to return to profit in 2010. He said the group expected a particularly difficult first half of 2009 and a loss-making full year with negative free cash flow.

The group's European stocks of unsold vehicles were near December 2007 levels at the year-end 2008, thanks to production cuts in the fourth quarter, the company said.

The 343 million net loss compared to a 885 million euro net profit recorded in 2007. It posted an operating loss of 367 million euro in 2008, compared with an operating profit of 1.12 billion in the year-earlier period.

On Monday, French President Nicolas Sarkozy unveiled a controversial 3 billion euro ($3.89 billion) loan for PSA PEUGEOT (UG.PA)Citroen, and fellow French automaker Renault , to help them weather the storm.

The group said the loan and other financing sources would cover its funding requirements of around 4 billion euros for 2009 for its sales and manufacturing activities.

The group intends to continue investment and expenditure on automotive R&D at around 3.5 billion euros, Streiff said.

Earlier this year, the group posted an 8.7 percent fall in full-year sales of completed vehicles [ID:nLC7096]. PSA Peugeot Citroen sales closed down 2.64 percent on Tuesday, against a CAC-40 benchmark index that was 0.5 percent lower.

(Reporting by Helen Massy-Beresford and Matthias Blamont, editing by Marcel Michelson)