This should have been an exciting moment: the Paris auto show, “Mondial de l’Automobil,” this weekend with over 100 new models from around the world, from econo-boxes with rounded corners to exotic prototypes that will never see production. Chicks next to some of them. Nausea-inducing colors, downsized motors. Something for everyone. But it had been preceded by two days of supplier events loaded with the dire verbiage of an industry on a death march. Particularly in France, whose private sector is veering into economic fiasco. And on Monday, it became official.

A barometer of the real economy in France, new car sales as measured by registrations, crashed in September—down 18.3% from September last year, and accelerating (year-to-date, sales were down “only” 13.9%). It was the worst September in years, worse even than the infamous Lehman September of 2008. And 2012 is shaping up to be the worst year since long before the financial crisis.

Of the French brands, market leader PSA Peugeot Citroen saw sales drop “only” 5%, helped by the introduction of its new sub-compact Peugeot 208. But year to date, sales were down 18.4%. Renault got killed. A stunning 33.4% plunge for the month and 19.8% YTD.

An equal-opportunity fiasco. Even the heroes from across the Rhine got their clocks cleaned in France. Volkswagen (VW, Audi, SEAT, Skoda) fell 17.4%. BMW and Mercedes where hit as well. GM (Opel, Chevrolet) tumbled 20.8%, Ford 31.5%. And Fiat, well, it might as well hang up its hat: down 38.4%!

In an ominous sign for the private sector and its investment climate, light utility vehicles (less than 5 tons) dropped 12.5% for the month, and “industrial vehicles” (over 5 tons) 20.1%.

“It’s unclear if automakers can survive without government help,” lamented VW CFO Hans Dieter Pötsch. But government help may be hard to come by. Steeped in the debt crisis, governments are struggling to reduce their deficits, or at least keep them from ballooning. Cash-for-clunkers programs, which burned through many billions of taxpayers euros after the financial crisis, or outright subsidies, will be a tough sell when pensions, salaries, and social services are on the chopping block.

French President François Hollande could only waffle about supporting the “competitiveness” of the French auto sector. Alas, on the production side, the sickness goes back years. In 2005, PSA and Renault together assembled 3.2 million vehicles in France; last year, it was less than 2 million, and this year will be even worse.

And then the second shoe dropped. France’s Manufacturing Purchasing Managers’ Index (PMI) dove to 42.7 in September, the lowest reading since April 2009, during the depth of the financial crisis. Only Greece, which lost a fifth of its economy over the last five years, was lower, but barely so. Even Spain outperformed France. Export sales skidded, but the worst was in the domestic market. New orders were particularly hard hit, a harbinger for pain to come. Lacking new orders, manufactures ate up their backlog at the fastest rate since March 2009—when the economy appeared to have seized.

Lack of work pushed the PMI employment component down for the seventh month in a row. Already, with unemployment at 10.6%, youth unemployment at 25.2%, and rising, and more than 3 million people out of work for the first time since 1999, heat is building up in the system.

Lay-offs, albeit difficult to undertake in France, have been making headlines. Trophy companies are involved, PSA and Air France-KLM Group, for example. Hollande himself stepped in to prevent them, or at least to delay them. Today’s headline hog is ArcelorMittal, largest steelmaker in the world. It will, despite government machinations, permanently shut down two idled furnaces. Furious workers instantly occupied the plant. At least they didn’t take management hostage, not yet….

The largest companies get most of the attention. But the confidence barometer of small and medium-sized businesses—the ones that are supposed to create most of the jobs—crashed in September to 84, the lowest level ever in the series, which started in 1992. It was at 129 in April. That’s what falling off an economic cliff looks like.

The private sector in France is only 44% of the economy, and shrinking. 56% is public spending, to remain level in the 2013 budget. So a measure of stability. But to rein in its deficit, the government is trying to impose a slew of tax increases on the private sector and households—how exactly that might perk up the private sector remains a mystery. Fasten your seatbelts.

Enjoy reading WOLF STREET and want to support it? You can donate. I appreciate it immensely. Click on the beer and iced-tea mug to find out how:

Would you like to be notified via email when WOLF STREET publishes a new article? Sign up here.