Workers at bankrupt French car parts factory New Fabris, which relies on Renault and PSA Peugeot-Citroen for 90% of business, are demanding EUR30,000 (US$42,000) in compensation from the two automakers or they will blow up the factory they are currently occupying.

CGT union official Guy Eyermann France Info radio: "Gas bottles have already been placed in various parts of the factory and are connected to each other. If Renault and PSA refuse to give us that money it could blow up before the end of the month."

The Chatellerault factory, which employs 360,  is thought to house car parts worth some EUR2m, as well as a new Renault machine estimated at a further EUR2m, the union leader said.

"We are not going to let PSA and Renault wait until August or September to recover the spare parts and machines still in the factory," he warned.

"If we get nothing, they get nothing at all." The union has set a 31 July deadline.

Eyermann said two coachloads of workers had visited Peugeot headquarters last week and a similar delegation would visit Renault bosses and the French employment ministry on Thursday to try to negotiate a settlement.

They hope to force the state to put pressure on the carmakers, which both received public funds to help them through the global downturn.

New Fabris filed for bankruptcy on 16 June.