* Launches 20 bln euro support fund
* Available to viable firms hit by bank lending drought
* Seen protecting strategic industries
(Adds details, quotes)
By Yann Leguernigou
SAINT-JULIEN-LE-CHEDON, France, Nov 20 (Reuters) - President Nicolas Sarkozy vowed on Thursday to protect key companies from being swallowed up by the financial crisis as he launched a 20 billion euro ($25.05 billion) fund to help French industry.
In his latest step to give life support to the euro zone's second-biggest economy, Sarkozy said the fund would invest in viable firms in need of cash, and shore up the balance sheets of companies deemed vulnerable in the face of falling stock prices.
France's aim was to make sure the financial crisis did not trigger the disappearance of strategic French industries at a time when banks were still proving reluctant to lend and investors could make easy investments in major companies.
"The day we don't build trains, aeroplanes, automobiles and ships, what is left of the French economy? Memories. I will not make France a tourist reserve," Sarkozy said in a speech at an aerospace supply manufacturing company near Paris.
"I want France to keep its factories, I want this process of factory relocation and outsourcing to stop and I want firms with the potential to develop to be able to do so, even if financial institutions at the moment are a little timid," he said.
The new fund would be managed by state bank Caisse des Depots, a state bank that traditionally has been used by the government to shield companies from hostile overseas predators.
It would consist of 20 billion euros to begin with, and could grow in value, Sarkozy said, noting foreign investors, and particularly sovereign wealth funds, would be welcome to join.
France and the CDC planned to raise a total of six billion euros in debt for the fund, with the rest coming from assets previously held by the CDC and the state.
PROTECTIONIST?
Investments would be made in viable companies, notably small- and medium-sized enterprises unable to obtain capital from blocked financial markets, he said.
Money would also be poured into medium- and large-sized companies including those that were deemed as strategic for the economy but which would be vulnerable to takeovers.
References made to the creation of such a fund have raised fears of protectionism in a country that many say treated yoghurt as strategic when U.S. soft drinks giant PepsiCo was rumoured to be eyeing Groupe Danone in 2005.
For Jean Claude Gruffat, who heads the American Chamber of Commerce in France, the fund needs to be watched with attention.
"It is perfectly legitimate for states to protect their strategic interest, they are all doing it. The question is what is included in your definition of strategic sectors of interest?" said Gruffat.
"Every country has its own policy but my view is that as the American Chamber of Commerce, we will pay a lot of attention to what's done in different countries and make sure we have a level playing field for our companies," he said by telephone.
Highlighting that investments would not mean state control, Sarkozy said that the fund would only take minority interests.
Sarkozy said the fund would be headed by Patricia Barbizet, an executive of Artemis, the holding company of billionaire investor Francois-Henri Pinault.
Bankers have noted the French investment fund is not the same as the sovereign wealth funds of oil-producing or emerging market states that typically use reserves to invest in markets abroad, sometimes to secure natural resources. (Writing by Tamora Vidaillet; Editing by Andrew Macdonald and David Cowell) (Additional reporting by Anna Willard and James Mackenzie)