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Last Updated: Wednesday, 27 September 2006, 10:39 GMT 11:39 UK
French impress at Paris Motor Show
By Jorn Madslien
Business reporter, BBC News, Paris Motor Show

Peugeot 908 RC concept
Peugeot is one of the carmakers moving into muscle territory

French carmakers are pulling out all the stops at this year's motor show in Paris.

Faced with tough competition, the firms are unveiling butch new models they hope will help them survive amid the turmoil that has shaken the car industry in recent months.

Peugeot is taking a bold step into muscle car territory with its aggressive looking 908 RC, powered by a 700bhp diesel engine that aims to showcase its diesel technology.

Sister marque Citroen is pushing the technology one step further, in a somewhat different direction, with its C-Metisse hybrid that combines a diesel engine with electric motors.

Rival Renault is showcasing a convertible luxury concept designed to rival Bentley's Continental GTC and help push the brand into more upmarket niches in order to boost flagging demand.

Renault's sales fell 9.4% during the January to June period this year, worse than the 2.5% fall in sales endured by PSA, which owns Peugeot and Citroen.

And whilst new models at the show might paint a bright future, analysts remain cautious.

"We still have a very poor situation in the automotive sector where outlook is extremely dire," says Alexander Law, chief economist at French research firm Xerfi.

"We are going to have to wait for next year for things to get better," says Mr Law.

Peugeot, for its part, announced plans for a 7% reduction in its workforce on the eve of the motor show, including cuts to output in Spain and France, as well as the previously announced closure of its Ryton plant in Coventy in the UK.

New alliances

Yet despite the problems, it is the chap in charge of Renault who is seen as the car industry's man of the moment.

Carlos Ghosn, chief executive of alliance partners Renault and Nissan, is expected to hold link-up talks with Rick Wagoner, chief executive of the world's largest car maker General Motors (GM).

Carlos Ghosn unveils the Qashqai
Nissan's Carlos Ghosn is playing a prominent role in the industry

GM's smaller rival Ford is also thought to be considering a merger or an alliance as part of its struggle to cut costs and capacity and halt sliding sales, and there is even talk of the two US giant car makers joining forces.

A Renault/Nissan/Ford alliance would be another alternative, and there is even talk of a link-up between the two American giants.

Number three, Chrysler, is already part of DaimlerChrysler, while PSA is in talks with Malaysia's troubled Proton.

Like the Americans, the French and European carmakers are up against tough competition from Japan and other Asian nations, most notably South Korea and Malaysia.

Among their Eastern rivals is Renault partner Nissan, which is showing its Qashqai, a small 4x4 that will be built in Sunderland, north-east England.

Koreans Kia and Hyundai are also preparing massive onslaughts on the European markets, and China's Landwind and Great Wall are unveiling a string of models that are due to go on sale in Europe within months.

Rapid response units

The response from European carmakers is to push ever more powerful cars at the Paris show.

Fiat Panda 4x4
Fiat is pushing the Panda envelope

Fiat is showing off a 150bhp version of its Panda, the model that helped bring about the Italian car maker's revival: Panda sales rose 20% during the first six months of this year.

Sister marque Alfa Romeo is unveiling its 8 Competizione super car, but the biggest push is coming from Lancia which is aiming to almost treble sales in four years to 300,000. Its sleek Delta concept is seen as crucial to help it achieve this.

Volkswagen, which is desperate to cut costs, is also trying to push its brand into upmarket segments where profit margins are higher. Its Scirocco coupe will be given the task when it hits the road the year after next.

And Volvo is wheeling out its small C30, a car targeted at a much younger generation than the Swedish brand's current drivers.

Analysts said Volvo's move is symptomatic of the way carmakers are continuously trying to re-invent themselves as they battle it out for additional shares of a tightening market.

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