PSA Peugeot Citroën became the latest European car maker to suffer the ill-effects of the economic slowdown today as it reported a 5.2 per cent fall in third-quarter sales and slashed full-year targets.

The company said it expected annual total vehicle sales to be 3.5 per cent below last year due to a “dramatic decline in the macro-economic environment” in the second half. It had expected volumes to rise by 5 per cent.

It expects western European markets to fall by about 17 per cent in the fourth quarter and slump by 8 per cent over the year.

It forecasts that growth will slow in its development regions, although it will reach 10 per cent for the year. Annual operating margins are just 1.3 per cent, down from 3.5 per cent last year.

The group said that it would make "massive" production cuts in the fourth quarter in response to a “market collapse” to ensure that it was correctly positioned to face 2009.

Peugeot Citroën will also raise prices to offset higher costs.

Carmakers have come under severe pressure this year as consumers put off buying new cars because of higher bills and less easily available credit.

The Paris-based company said third-quarter sales fell 5.2 per cent to €13.3 billion compared with the same period last year.

Peugeot Citroën's gloomy update follows those of three other big carmakers: Renault cut full-year profit targets after third-quarter sales fell 2.2 per cent, Germany’s Daimler reported a fall in North American sales and abandoned its 2008 earnings forecast and Italy’s Fiat warned sales could drop 20 per cent next year.

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