PSA Peugeot Citroen's supplier network in France is burdened with 40% too much industrial capacity, its head of purchasing said on Friday.

Jean-Christophe Quemard told Reuters around half of the supplier overcapacity in France was linked to the current climate, while half was "structural".

"The restructuring of the automobile sector must continue," Quemard said. "Shock absorbers have played their role," he said, referring to government help. "But it is not over. There is consolidation and restructuring work still to be done."

PSA would inject over EUR2bn (US$3bn) into the supply chain in 2009, including EUR250m euros of direct aid to struggling suppliers, Quemard told the news agency.

He said EUR1.3bn euros of the total came from reducing payment times to suppliers to comply with new regulations.

In the first half, PSA made cash contributions of EUR160m to suppliers in difficulty.

The group also contributed EUR200m to a fund to help suppliers modernise, he added, and contributed EUR323m to the recapitalisation of Faurecia in it owns a majority stake.

Speakers at this week's Reuters Auto Summit said suppliers were likely to consolidate.

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