By Marine Pennetier
PARIS (Reuters) - France's finance minister pledged to make sure PSA Peugeot Citroen
Peugeot last month agreed to enter final talks on an equity fundraising that would see China's Dongfeng Motor <0489.HK> and the French state each take about 20 percent stakes, with the Peugeot family's shareholding cut to 15 percent from 25 percent, a source familiar with the matter said then.
"PSA must remain a major French carmaker, and the state is very attached to the subject," Pierre Moscovici told France's Radio J, reiterating that the state had already given a 7 billion euro ($9.5 billion) guarantee to PSA's finance arm.
"The state is particularly vigilant, the state feels involved, it will do everything and use its influence to ensure PSA remains a major French carmaker and finds the means to develop."
Peugeot needs to find "even more solid industrial alliances" as well as strengthening those it has already with U.S. carmaker General Motors
Peugeot is cutting jobs and plant capacity in an attempt to halt losses inflicted by Europe's economic problems, which have included six straight years of declining new car sales.
Le Monde reported on Friday that advisers Rothschild and Morgan Stanley estimate Peugeot could now carry out a larger portion of a possible 3 billion euro capital hike - between 1.5 billion and 2 billion euros - by issuing shares directly on the market.
Peugeot shares are up 21.6 percent so far this month, outpacing a 16.8 percent gain at French rival Renault
The latest industry data also showed European car sales had their strongest performance in four years in December, with a recovery spreading to Mediterranean markets.
The plan, according to Le Monde, would see Dongfeng and the French state invest about 500 million and 750 million euros respectively instead of 1 billion each, turning them and the Peugeot family into three almost equal partners with 12 to 15 percent.
Robert Peugeot, who runs the family holding that currently has 38 percent of voting rights, favors the idea, but supervisory board Chairman Thierry Peugeot wants instead to carry out the entire capital increase directly via the market, Le Monde said.
Representatives of the French government, Peugeot and Dongfeng have held meetings in China along with their advisers to discuss a transaction underpinned by a capital increase, a source familiar with the matter has said.
A Peugeot spokesman said negotiations on "an industrial and commercial project with Dongfeng and other partners" were continuing.
GM, meanwhile, sold its 7 percent stake in Peugeot last month ahead of the possible new share issue, although it said their industrial cooperation remained strong and joint development of compact and small minivans would continue.
($1 = 0.7376 euros)
(Writing by James Regan; Editing by Mark Potter)