Peugeot Citroen has posted a net loss of €5bn (£4.3bn) for the last year, which included a €3bn (£2.59bn) financial charge on its annual accounts.
France's largest car manufacturer said the annual loss was the largest in its history and that it "reflects the deteriorated environment in the automotive sector in Europe".
New vehicle sales dropped 12.4% last year to €27.8bn (£23.9bn), while the rising cost of steel and other materials triggered an operating loss of €1.5bn (£1.5bn) over the same period.
More than 2.8 million Peugeot and Citroen vehicles were sold last year, but that was 300,000 down on the 3.1 million sales recorded in 2011.
Recent research from Brussels-based car industry firm ACEA showed that Europe's car market shrank 8.2% in the 12 months to December 2012 - its lowest level since 1995.
Peugeot Citroen is estimated to control more than two-thirds of the French car market, which contracted by 13.9% last year.
The recession-hit group was poised to record an annual net loss of around €3bn (£2.6bn) last month, only for it to incur a massive financial penalty in early February.
The figures have caused the company's share price to plummet by almost 60% over the last 12 months, which has raised a few eyebrows in the upper echelons of the French government.
French budget minister Jerome Cahuzac pitched the idea about the government buying a stake in the Paris-based group only for the suggestion to be dismissed by the finance minister Pierre Moscovici, who told radio station France Info: "I don't want there to be any panic."
Mr Moscovici refuted claims that the government was considering a partial nationalisation of the struggling manufacturer, and insisted that ministers had already "done what needed to be done" to help the company.
The French government promised to set aside €7bn (£6bn) in guarantees for Peugeot's financial arm, Banque PSA Finance, with the first €1.2bn (£1bn) instalment being cleared by the European Union (EU) earlier this week. However, the EU only approved the initial government lifeline on the condition that Peugeot restructured its car business within six months.
French unions successfully stalled the closure of a major Peugeot plant north of Paris after the carmaker announced plans to cut up to 8,000 jobs last July.
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