French auto giant PS Peugeot Citroen must restructure urgently after strategic misjudgements over 20 years, a report for the government warned on Tuesday, urging a tie-up with a global group.
A restructuring was inevitable and the firm had to "act urgently to get on top of the situation," the report said, reproaching the company for missing the bus of globalisation.
The report by government expert Emmanuel Sartorius, said: "The need, in principle, for a plan to reorganise industrial activities and reduce the workforce cannot be challenged unfortunately."
It said that "in the medium and long term, the future of PSA lies in a strategy of an alliance with a big world automaker."
The report was commissioned by the new Socialist administration against the background of a plan by the group, the second-biggest automaker in Europe after the VW group, to shed 8,000 jobs in France.
The company was known to be experiencing pressing financial strains, but the announcement of the cutbacks soon after the new government was elected came as a shock and caused considerable uproar in France.
The report said the company was too dependent on the European market, which still accounts for 50 percent of its sales.
Its position as a general carmaker added to its difficulties given that eastern Europe led in the production of lower-range models and Germany dominated in high-end and luxury cars.
The government has signalled strongly that it wanted the restructuring measures to be diluted, in a context where a decline of manufacturing activity in France, and investment abroad including the making of cars in French plants outside France, is a hot subject and a policy priority.
The report, revealed to trade unions on Tuesday, severely criticised management and shareholders for their strategy in the past, but appeared to support the company's general line that there is no alternative to deep restructuring.
PSA Peugeot Citroen, which is not controlled by the French state and in which the Peugeot family has a strong voting interest, has recently entered a limited alliance with General Motors of the United States, itself recovering from bankruptcy.
The report said the company, which has dropped out of the Paris CAC 40 index and has been beset by poor sales and plummeting share prices, had erred "in choosing to maintain its independence."
It said: "The management lacked in ambition in trying to internationalise the group."
It also denounced the plan for mass job cuts at the emblematic Peugeot plant at Aulnay north of Paris saying "history would have been written in a different manner if the management had engaged in a transparent dialogue with social partners and state authorities."
The company aims to break even by the end of 2014.