The man suspected of carrying out an attack on a factory in France and beheading his employer yesterday refused to speak to police investigators.

Truck driver Yassine Salhi caused an explosion by crashing his truck into a US-owned chemical warehouse near Lyon, according to prosecutors. His boss Herve Cornara, 54, was found decapitated, with his severed head hung on factory gates alongside flags with Arabic inscriptions.

The shocking incident on Friday came on the same day as attacks in Tunisia and Kuwait, raising fears the atrocities had been co-ordinated by Islamic State.

French authorities said Salhi was known to have links to Islamic militants in the past, but investigators had not yet turned up any motive or possible foreign connection in relation to Friday's attack.

Yesterday Salhi remained in custody in the city of Lyon together with his sister and wife. Paris prosecutor's office spokeswoman Agnes Thibault-Lecuivre said a fourth person who had been detained was released.

Under French anti-terrorism laws, Salhi and the two women can be held for up to four days before either being released or handed preliminary charges and locked up.

Meanwhile hundreds of people turned out in the region to honour murdered businessman Cornara and denounce the violence.

A minute's silence was held in Saint-Quentin-Fallavier, the town south east of Lyon where Friday's attack took place at an Air Products chemicals warehouse.

Several hundred people also gathered outside a housing project in the town of Fontaines-sur-Saone to honour local resident Cornara, the manager of a transportation company that had employed Salhi since March.

They recalled a kind, humble man who was active in the community of the Lyon suburb.

"He lived on the fifth floor, me on the fourth. He spoke with all the young people in the neighbourhood. He didn't differentiate between (non-Muslim) French and Muslims," said Leila Bouri, a 24-year-old cafeteria cashier. "If you ever had a problem, you would go see him."

She added: "When I heard this, I was shocked. It's shameful. I am a Muslim, but you can't kill like this. It's not who we are."

The severed head appeared to mimic Islamic State's practice of beheading prisoners and displaying their heads for all to see, and came days after the militants urged attacks during the Muslim holy month of Ramadan.

No group immediately claimed responsibility for the attack.

Speaking after the attack, French President Francois Hollande said: "We have no doubt that the attack was to blow up the building. It bears the hallmarks of a terrorist attack."