According to French media, a man's head was severed and pinned at the gate with a flag bearing Islamic inscription while his body was found elsewhere in the factory premises.
Several loud explosions have been reported in the area. An attacker with suspected ties to French Islamic radicals rammed a car into an American gas factory.
France immediately started investigation on the incident. The attack according to President Francois Hollande started shortly before 10.a.m.
French Interior Minister, Bernard Cazeneuve said a man from Lyon region who had been under surveillance since 2006 for suspected ties to extremists was seized by an alert firefighter.
Several other people are in custody as authorities try to ascertain if there were other accomplices.
French authorities are trying to identify the man whose head was severed and pinned at the gate while body was elsewhere in the factory presmises.
The site where the attack took place belongs to Air Products, an American chemical company based in Allentown, Pennsylvania.
The company issued a statement saying,
"The site is secure. Our crisis and emergency response teams have been activated and are working closely with all relevant authorities".
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