PSA Peugeot Citroen has warned that it expects to post an operating loss of £855 million in 2009.
PSA blamed falling sales, combined with uncertainty over whether governments would continue to financially support the sector.
PSA has already received €3bn (£2.6bn) from the French government and has now issued a convertible bond offer intended to raise up to €575m (£493m) in order to shore up its finances.
Despite the expected loss, PSA said remains more positive about the European market as whole, expecting it to decline by 12% rather than the 20% it had originally forecast.
Peugeot said: “A number of uncertainties remain like whether or not the government support programs will be pursued in 2010. If not, fourth-quarter production will be scaled back.”