Cinema is alive and well. Some posts above reek of nostalgia. g-d makes sense, yet again. Part of the problem might be poor distribution and marketing of "challenging" fare. 
As far as French directors, how about Laurent Cantet, Claire Denis, Olivier Assayas and Gaspar Noe. Francois Ozon and many others are less consistent, but still accomplished.
I list 20 of my fave current auteurs in the "modern directors" thread and feel bad for excluding another 20 or so.  