The ailing French car industry has given President François Hollande and his government their first major social and industrial challenge since coming to power in May. Earlier this month, the country’s largest manufacturer, PSA Peugeot Citroën, announced it was to slash 8,000 jobs and close its major plant at Aulnay-sous-Bois, near Paris, ending months of rumour and company denials. This week, just as the new cash-strapped socialist government announced a modest plan of aid for the car-making sector, a programme described by one expert as "trying to put out an immense fire with a glass of water", PSA revealed first-half losses of 819 million euros. Meanwhile, PSA workers mounted a demonstration outside the company’s Paris headquarters (photo) to vent their anger at the future lay-offs and their frustration at the government’s hitherto refusal to block the plan. Ellen Salvi and Stéphane Alliès report on a disastrous week for what was once a proud flagship of French industry.