In an interview with the French daily, published on Tuesday, Arnaud Montebourg also said the struggling automaker should cancel "hundreds" of planned job cuts and guarantee the future of domestic plants.

Peugeot is weighing a state-backed rescue for its lending arm, Banque PSA Finance (BPF), which funds Peugeot and Citroen dealers and car loans. Montebourg had already warned that any help would come with strings attached.

In his newspaper interview, the minister detailed some of the undertakings he is seeking from the carmaker.

"I want workers to sit on the supervisory board, to bring more balance to strategic decisions," Montebourg was quoted as saying. "I also want an independent administrator on the board to liaise with the government."

The French state has no stake in Peugeot, which in July announced 8,000 additional job cuts and the closure of an assembly plant to halt spiralling losses.

Unlike domestic rival Renault (RENA.PA), where the government has two board seats and a 15 percent holding, Peugeot has been slow to shift production from France to lower-wage countries.

Recent downgrades to Peugeot's credit rating threaten to relegate the financing arm to junk status, further widening the competitiveness gap with rivals such as Volkswagen (VOWG_p.DE) by making its car loans more expensive.

A support package under discussion with the government and French banks would reportedly include postponed repayments on some bank debt and a state loan guarantee, reducing the division's financing costs.

Montebourg also vowed to "weigh the consequences" of Peugeot's alliance with General Motors (GM.N).

The government is seeking "a commitment from Peugeot to preserve all of its French plants, so the kind of restructuring plan announced in July does not repeat itself", he said.

(Reporting by Laurence Frost; Editing by Helen Massy-Beresford)

• A Permanent Economic Emergency