Paris - The global economic crisis could lead to the failure of one out of every five small and mid-sized companies in the European automobile industry, European Commission Vice-President Guenther Verheugen said Tuesday in Paris.

Therefore, Brussels must do everything in its power to protect the sector, Verheugen said at a crisis meeting of individuals from all branches of the industry and French government officials aimed at devising state measures to aid the sector.

The head of French carmaker Renault, Carlos Ghosn, agreed with the bleak forecast, saying that what he called a "brutal and global crisis" could lead to 15 to 20 per cent of jobs being lost in the European auto industry in 2009.

Ghosn said that car production in Europe, which fell by some 25 per cent in the fourth quarter of 2008, would decline by about 15 per cent this year.

The crisis is threefold, he said. Firstly, credit is too expensive, and two-thirds of all cars in Europe are bought on credit.

In addition, producers must invest in new products and new equipment. And, finally, one out of every three suppliers in the sector is in a "very difficult" situation.

"What is at stake is the survival of a large number of manufacturers, suppliers and dealers," Ghosn said. Therefore, car makers, labour unions, governments and the EU must all work closely together, he urged.

The French government on Tuesday established a fund with Renault and the country's other large carmaker, CSA Peugeot Citroen, to forge internationally competitive suppliers and subcontractors in the industry.

The two companies and the state are each to contribute a third to the fund, which will comprise 300 million euros (390 million dollars).

French Prime Minister Francois Fillon said that money from the fund would be available by the end of the month.

Verheugen said that the EU had little capacity to come to the aid of individual companies, except for the European Investment Bank, which is supporting the development of "green" products.

He also said that Europeans must keep an eye on what kind of aid US president-elect Barack Obama provides to American car producers, to ensure that European carmakers do not suffer from a competitive disadvantage. (dpa)