The European car industry reeled on Wednesday, with French Peugeot Citroen needing a 7 billion euro state rescue for its credit arm, and Ford closing a factory in Belgium with 4,300 job losses.

Peugeot, No.2 in Europe, waived its dividend and its shares fell to a 26-year low point.

Both companies have warned they are hugely burdened by overcapacity in Europe.

In stark contrast, Europe's No.1 carmaker, Germany's Volkswagen, said profits had risen by 60 percent in the third quarter.

The Peugeot-Ford announcements highlight the effects of four years of crisis beginning with the financial meltdown in the banking sector, followed by austerity cutbacks to fight the eurozone debt crisis.

Several European governments responded to the first wave of crises with "cash for clunkers" subsidies, but as these ran out and recession bit in several markets, the drive went out of car sales.

The VW group has pulled through with strong sales of top-range vehicles in globally diverse markets with localized production.

PSA Peugeot Citroen has already announced 8,000 job cuts and a plant closure which the French government wants pruned back.

The firm reported sales had fallen by 3.9 percent in the third quarter and that it was waiving dividends for three years, the duration of the 7 billion state guarantee for its credit arm.

Volkswagen meanwhile said in an interim report that net profit amounted to 11.3 billion euros ($14.6 billion) in the July-September period.

"Although the times aren't easy... we remain committed to our ambitious goals for 2012, despite growing headwinds," VW Chief Executive Martin Winterkorn said.

The decision by US auto giant Ford to close its "under-utilized" factory in Genk, Belgium, by the end of 2014, will cost 4,300 jobs.

The closure is part of an overall shakeup of Ford's European operations in the face of falling demand, a statement said.

The plan would "help to address manufacturing overcapacity stemming from a more-than-20-percent drop in total industry vehicle demand in western Europe since 2007," Ford explained.

Ford Genk is the main employer in the Flemish region of Limbourg near the Dutch border and, when taking into account subcontractors, provides work for some 10,500 people.

The French government support for Peugeot Citroen's credit arm BPF is intended in part to enable the group to leverage its assets, but the condition that dividends must be waived hit the group's capitalization hard.

In late morning trading, shares in PSA Peugeot Citroen were showing a fall of 7.48 percent to 5.38 euros, the lowest for 26 years.

AFP