VALENCE, France (AFP) - Sebastien Loeb looked set fair for a record fifth win in the Monte Carlo rally after emerging from Saturday's third-day action with a 10.6sec lead over Mikko Hirvonen of Finland.

However, home favourite Loeb, driving a Citroen C4, lost his teammate Dani Sordo, who retired after turbo problems forced him out of the reckoning following the 11th special stage of this, the first leg of the 2008 world championship.

Australian Chris Atkinson lies third in his Subaru Impreza, 3min 02.6 off the pace.

Loeb picked off 10 special stages but Sordo's dream died after he had netted three only to fall victim to technical problems when standing second, a plume of smoke emerging from his vehicle.

Ford's Finnish driver Jari-Matti Latvala, who had earlier broken into the top ten, also had to pack up early after damaging his front-left track control suspension on the 12th special.

The opening day had seen the Finn suffer a puncture.

"It was a perfect day for us today," said Loeb, who was up at the crack of dawn for the off.

"We handled things very well."

"Conditions weren't easy at the start of the day - it was dark during the opening special - then it was foggy during the second and there were patches of frost in places."

Some 50,000 people turned out along the route around the southern French town of Valence to cheer on their favourite - but they could do nothing to raise the spirits of Sordo.

"It's tough luck on Dani and always unfortunate to find that the other car has a problem as it is exactly the same" as Loeb's own.

Hirvonen praised Loeb's showing.

"It's been impossible to stay with Seb. He is really unbelievable," said the Finn admiringly.

Loeb was not counting his chickens, however, ahead of Sunday's denouement.

"We have to make use of the two-minute advantage - and depending on the conditions we'll see what we have to do. Two minutes is enough to change a wheel."