French carmaker Renault on Thursday posted a worse-than-expected loss on for the first half in line with results at its European rivals as auto sales fell sharply but it said the outlook is stabilizing.

In Japan two second tier automakers, Mazda Motor Corp <7261.T> and Mitsubishi Motors Corp <7211.T>, also posted losses for a third straight quarter but kept their annual forecasts unchanged, relying on cost cuts to offset the weak demand.

Automakers have seen sales crumble in the past 12 months due to global economic downturn and tight credit markets that have already driven U.S. rivals General Motors and Chrysler to bankruptcy and restructuring. [nCARS1]

Renault, which has a 44 percent stake in Japanese carmaker Nissan Motor Co <7201.T>, expects the world automotive market to fall 12 percent in 2009 compared with last year to over 57 million units.

Automakers are squeezing costs to reduce losses as production capacity remains severely underused, but they mostly foresee an improvement in output on a quarterly basis for the rest of the year as they bring inventory under control.

The business environment is still uncertain, Mazda Chief Financial Officer Kiyoshi Ozaki told a news conference.

In Europe, Renault, which ranked as about the 10th largest car maker in the world by the end of the first half, expects Europe's car market to finish the year with an 8 percent decline, after a 13.7 percent fall in the first six months.

Renault itself is showing resilience, Chief Executive Carlos Ghosn said, adding the group was preparing for the post-crisis period with zero emission vehicles, expansion of its entry-level range and a move to expand synergies with alliance partner Nissan.

The group said that despite the effects of incentive schemes to scrap older cars in major European markets, Europe made up half the total revenue decline. Group revenues fell 23.7 percent to 15.99 billion euros ($22.5 billion) in the period.

Governments around the world have introduced stimulus measures to revive the sector which is also racing to reposition itself for more ecologically-minded buyers with hybrid cars and electric vehicles.

The product mix has been pulled downwards, Renault said. Smaller, cheaper models are eligible for government scrapping schemes, under which drivers are paid cash bonuses to trade in old cars for newer, greener ones.

Renault posted a group operating loss of 946 million euros for the first half, against an operating income of 845 million euros in the same period a year earlier.

Ghosn, who is also CEO of its Japanese alliance partner Nissan, said earlier in July that he expected 2010 to be as difficult as 2009 as the auto industry crisis continues.

French carmaker PSA Peugeot-Citroen on Wednesday posted a first half loss and said it did not see a recovery in Europe starting before the end of 2010 but said it saw good potential from the Chinese and Brazilian markets.

French car parts maker Valeo on Wednesday posted lower sales and a 54 million euros second-quarter net loss but forecast a rebound in automobile production in the third quarter.

German truck maker MAN SE said on Thursday it saw no sign of an upturn as it posted a plunge in second-quarter operating earnings in line with market expectations.

Truck makers such as MAN and its Swedish rivals Volvo and Scania have equally been hit hard by plummeting demand over the past year as the economic downturn has run its course.

German peer Daimler Trucks , the world's biggest truck maker, this week reported a 1.1 billion euros deterioration in second-quarter EBIT, swinging to a substantial loss after unit sales fell 56 percent.

Meanwhile German auto parts maker Continental , which faces debt problems after its controlling investor Schaeffler, a family-owned bearings maker, made a hostile bid, also reported on Thursday a Q2 net loss attributable to shareholders of 190 million euros.

($1=95.04 Yen; $1=.7095 euros)

(Additional reporting by Matthias Blamont, Christiaan Hetzner and Niklas Pollard; Editing by Richard Hubbard and Mike Nesbit)

Japan General motors