PSA Peugeot Citroen and the French government have rushed to pour cold water on the possibility Paris could step in and take a stake in the stuggling automaker.

Both were responding to a suggestion apparently made by French Budget Minister, Jerome Cahuzac, in which he appeared to say the government could invest in PSA by being quoted as noting 'it's possible,' adding 'this company cannot and must not disappear.'

Speculation was heightened today when PSA said it was writing down the value of its assets by EUR4.1bn, a move interpreted as a sign that it will announce big losses when it publishes full-year financial results next week (February 13).

However, France's powerful Finance Minister, Pierre Moscovici, has moved to quash such a move by the government in comments made to just-auto from Paris by PSA.

"It was denied by the Minister of the Economy [and Finance]" said the PSA spokesman. "We have no comment on a subject that does not exist because it has been denied.

"Monsieur Cahuzac and the Minister of Finance were interviewed and they expressed a theoretical point of view. It was denied."

Despite the rebuff, the very suggestion the French State could step in to aid PSA, has caused enormous ripples in Paris, whose socialist government has taken a keen interest in the fate of its two giant automakers, who face mounting struggles in Europe.

The seriousness of PSA's situation was outlined last week with the more moderate Force Ouvriere union telling just-auto there was a possibility PSA could face bankruptcy as it incurred vast losses of EUR200m (US$268m) per month.

"It is reasonable to think about possible bankruptcy," said Force Ouvriere automobile federal secretary, Jean-Yves Sabot.

"To lose EUR7m per day is not a situation that is possible to continue. Our confederation and other unions participate in all discussions. We have to get the business out of this big difficulty."

The denials come as major union unrest continues to rock the company, which says it will close its Aulnay plant near Paris earlier than scheduled after reaching an agreement to move half the workforce to another factory.

PSA has outlined plans to begin moving half of Aulnay's 3,000 workforce to its Poissy plant within days or weeks - more than a year ahead of schedule.

The Ministry of Finance in Paris was not immediately available for comment.