The company said the plan was prompted by the deteriorating economic outlook.

It said this "far exceeded the worst-case scenarios envisaged" when it started a profit recovery plan two years ago.

Renault, the sixth largest car maker in Europe, said it was now scaling back its production targets because of weak sales in Spain, Italy and the UK. <!-- E SF -->

The French car maker had planned to produce 3.3 million vehicles this year but said it would miss that target by 300,000.

As well as weaker sales in Europe, its production in Iran has been lower than expected this year.

Renault started making the Logan model in Iran in March 2007, with 100,000 being sold in the first week of production.

It was the company's first investment in that country since the Iranian revolution in 1979, with the cars being made by two local manufacturers, Iran Khodro and Saipa.

Overall Renault is looking to cut its costs by 10% and will go ahead with a previously announced rise in car prices to offset the rise in the costs of its raw materials.

Despite the downbeat outlook, the company reported that its worldwide sales rose by 2.3% in the first half of this year.

As a result its half year net profit rose from 1.07 billion euros to 1.467 billion euros.

The financial results echoed those from its European rivals this week from Volkswagen, Peugeot-Citroen and Fiat.

All three said their half year earnings had risen despite falling sales in Western Europe.