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UPDATE 1-Peugeot lifts cash target as restructuring kicks in

* Peugeot says first GM alliance savings seen in H1

* Net loss cut by almost half to 426 mln euros

* Auto division trimmed losses

By Laurence Frost

PARIS, July 31 (Reuters) - PSA Peugeot Citroen raised its 2013 cash goal on Wednesday, saying spending cuts and an alliance with General Motors had already begun to pay off.

The struggling French automaker said it now aims to reduce closely watched cash consumption before restructuring costs "at least by half" from last year's 3 billion euros ($4 billion) - potentially undercutting its earlier 1.5 billion target.

Peugeot's turnaround plan is "going more quickly than expected", Chief Financial Officer Jean-Baptiste de Chatillon said as he presented first-half results. "But we've still got a lot of work to do."

Peugeot is Europe's second-biggest carmaker by sales and the region's worst casualty of a brutal auto sales slump now in its sixth year. After a 5-billion-euro net loss in 2012, Peugeot lost more ground in the first half with a 13.3 percent decline in European car sales - twice the market decline.

Chief Executive Philippe Varin is fighting back with spending cuts, joint vehicle programmes with new alliance partner GM and the elimination of 11,200 jobs over two years.

"The GM alliance is in the execution phase with the first purchasing savings (achieved) in the first half," Varin told analysts.

Peugeot's operating loss widened to 65 million euros from 51 million before one-off gains and charges, on a 3.8 percent revenue decline to 27.71 billion euros.

But Peugeot reined in its cash consumption to 51 million euros in the half from 449 million a year earlier, thanks in part to a 764 million euro cut to capital expenditure.

Before restructuring, cash flow came to a positive 203 million euros, helped by dividend payments and other gains that will not be repeated in the second half. Peugeot also cut its net loss by almost half to 426 million euros.

The core auto division also fared slightly better. A series of model launches helped trim the divisional operating loss by 29 percent to 510 million euros, even as revenue tumbled 7.5 percent.

In China, where Peugeot is about to open a fourth plant, first-half sales surged 33 percent to 278,000 vehicles and the French carmaker took a 100 million euro dividend from its joint venture with local partner Dongfeng.

Peugeot's net debt rose to 3.32 billion euros at June 30 from 3.15 billion six months earlier.