PSA Peugeot Citroën expects to cut another 1,500 jobs by the end of 2014, adding to an existing job reduction plan that has prompted intense political opposition in France.

The carmaker is burning through €200m of cash every month.

Shares in the struggling French carmaker rose 9 per cent to €5.37 as investors welcomed evidence that the company was taking action to reduce overcapacity in its domestic plants.

Peugeot said the additional 1,500 workforce cut involved no redundancies and was an estimate of the “natural attrition” of workers retiring or leaving the company over the next two years.

It comes on top of an 8,000 reduction announced earlier this year, which included the closure of its Aulnay plant outside Paris. Another 1,700 jobs will also go as part of a previous cost-cutting plan, meaning the carmaker expects to shrink its French operations by 11,200 over two years.

Peugeot shares have fallen sharply this year as it suffers from plunging car sales in France, Spain and Italy, with some analysts predicting that it may need to cut capacity further if the market continues to decline. The carmaker is burning through €200m of cash every month.

Separately, people close to the company denied reports that the government of Algeria was in discussions about buying a stake in Peugeot.

The carmaker is thought to be considering opening a small facility in Algeria, which is an important market for Peugeot, although this would not be on a similar scale to plans by Renault to construct a plant in the country.

In contrast with crisis-hit Europe, car sales in Algeria are booming, with vehicle sales in the six months to June increasing by almost 50 per cent to 225,000 year on year.