French automaker PSA Peugeot Citroen announced 8,000 job cuts and the closure of an assembly plant as it struggles with mounting losses, in a move that could hasten a wave of restructuring in western Europe.

The Aulnay plant near Paris, which employs more than 3,000 workers, will stop making cars in 2014 as part of a drive to reorganize Peugeot's under-used domestic production capacity, the company said Thursday.

It will be the first car plant to cease production in France for 20 years, posing a challenge to new Socialist President Francois Hollande's objective of reviving industrial production.

The government said it was studying the closure plan but stopped short of condemning it, incurring the wrath of France's biggest industrial union, the hardline CGT.

French Prime Minister Jean-Marc Ayrault promised in a statement to ensure that Peugeot helps laid-off Aulnay workers find jobs and said ministers would present a wider auto industry support plan on July 25.

A second factory in Rennes will shed 1,400 of its 5,600 jobs as the company downsizes in response to shrinking demand for larger cars such as the Peugeot 508 and Citroen C5. Some 3,600 non-assembly jobs will also be scrapped across the company.

"I am fully aware of the seriousness of today's announcements," Chief Executive Philippe Varin said in a statement. "The depth and persistence of the crisis impacting our business in Europe have now made this reorganization project indispensable."

Peugeot said it would post a net loss in the first half and a 700 million euro ($857.5 million) operating loss for the core car-making division.

The manufacturing operations are burning 200 million euros a month, with cash flow not expected to turn positive until 2015, the company said.

"People were not expecting them to consume cash at such an alarming rate for such a long time," said Erich Hauser, a London-based auto analyst with Credit Suisse.

"This is a company that has run out of options," he said. "Peugeot has lost the plot in European small cars, which were its traditional mainstay."

Shares in Peugeot rose as much as 3 percent in early trading on Thursday.

The stock has plunged 32 percent since January 1, wiping 1.2 billion euros off the struggling automaker's market value. General Motors bought a 7 percent Peugeot stake in March as part of a far-reaching alliance plan.

Unlike Volkswagen, the French automaker is heavily exposed to southern European markets worst hit by the region's debt crisis and lacks its German rival's export success or the support of a low-cost brand like Renault's Dacia, produced in Romania.

Peugeot last week posted a 13 percent decline in first-half sales to 1.62 million light vehicles.

Reuters