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PSA Peugeot Citroen, Europe’s second- largest carmaker, said it aims to achieve stable sales in the region this year as new models help the manufacturer increase its presence in a declining market.

The Peugeot 5008-model people-mover and Citroen C3 Picasso minivan have helped lift the carmaker’s European market share by almost 1 percentage point to 14.6 percent, Chief Executive Officer Philippe Varin told investors today at the annual shareholders meeting in Paris.

“We’re compensating for the market decline with our increasing share,” Varin said. As a result, 2010 sales will be “at the same level” as last year’s, he said.

The carmaker is forecasting a 9 percent contraction in the region’s auto market for 2010 as governments’ “cash-for- clunkers” subsidy programs expire. Industrywide deliveries in Europe fell 7.4 percent from a year earlier in April, according to the European Automobile Manufacturers Association. Peugeot accounted for 13.8 percent of the region’s car sales in the first four months of 2010.

French auto sales fell 12 percent in May, ending 12 consecutive months of increases, after the government began phasing out incentives. Payments to encourage consumers to scrap older cars and buy new ones were cut to 700 euros per vehicle at the start of the year from 1,000 euros in 2009 and will be trimmed further to 500 euros in the second half.

Dividend Plan

Peugeot, which is sticking to a target of “positive” operating profit in the first half, said it hopes to restore dividends with this year’s earnings. The Paris-based company halted payouts after posting net losses in 2008 and 2009.

Varin called on the French government to reduce labor costs by cutting the amount employers pay on workers’ salaries to fund welfare benefits.

“Many of these charges have very little to do with work,” Varin said. “It’s a situation that’s ultimately damaging for French industry.”

Recent tax breaks on research and the abolition of a local labor tax were “not enough to overcome our handicap, particularly with regard to Germany,” Varin said. France’s domestic car production has fallen about 30 percent in the past decade, while Germany’s has remained stable, he said.

Peugeot wants to repay 1 billion euros in state loans in the second half, a year ahead of schedule, to eliminate the 6 percent interest payments on the debt, Varin said.

The government, which extended emergency loans last year of 3 billion euros each to Peugeot and smaller domestic rival Renault SA, is open to early repayment of 1 billion euros in 2011, Industry Minister Christian Estrosi said on May 27.

To contact the reporter on this story: Laurence Frost in Paris at lfrost4@bloomberg.net.

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