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Last updated: December 5, 2013 6:41 pm
Every week for four months, Philippe Dorge sat in a basement room under fluorescent lights to thrash out differences between PSA Peugeot Citroën and some of the most feared industrial unions in France. Eventually in October they cut a deal to reduce overtime pay and freeze salaries.
“It got heated at times,” says Peugeot’s Mr Dorge, with the unions withdrawing to discuss tactics in their own private room. “But the car market has changed. In the end people understood that if we do not change with it, we are dead.”
Mr Dorge is not alone in his success. A slew of French companies have been restructuring in recent months and, unlike in past years, the processes are going smoothly, beset by little in the way of strikes or angry government interventions.
Air France-KLM, Michelin, Alcatel-Lucent, Alstom and Renault are just some of the companies in France in the process of cutting their French workforce, closing plants and agreeing wage freezes to become more competitive.
When Air France-KLM this year announced it was cutting 2,800 jobs in France, on top of the 5,100 already announced, barely a peep was heard out of unions or government. The group reported a net loss of €793m for the first half of 2013.
In June the government also took in its stride a plan by Michelin to cut 730 jobs at one of its French tyre plants, with finance minister Pierre Moscovici emphasising “[Michelin] must be competitive, present on the market, innovative and strong”.
It has not all been smooth sailing. Wranglings over lay-offs at Goodyear Tire have yet to be resolved, labour laws remain restrictive compared to the UK, and there has been the occasional bluster from governments and unions when lay-offs are announced.
But it is still in sharp contrast to the situation just one year ago when ArcelorMittal, the world’s largest steelmaker, tried to close two furnaces in a move that threatened the jobs of 629 of its 20,000 French employees. It prompted a broadside from unions and the government.
Arnaud Montebourg, the leftwing industry minister, threatened to nationalise the site and called the company liars that were not welcome in France. “The violence and the brutality of Mittal; they are going to have to pay,” he said at the time.
The shift has come as the French economy, and traditional heavy industry in particular, has been coming under increasing pressure this year. The latest data show French growth lagging behind much of Europe, with industrial output falling.
Labour costs in France are among the highest in Europe at €36.84 an hour compared to €36.24 in Germany, €22.94 in the UK, €22.43 in Spain, €8.88 in Slovakia and €3.82 in Romania, according to Coe-Rexecode, a French think-tank.
Many unions are acknowledging that the weak state of some industries means job losses are inevitable. The Force Ouvrière union recently said Peugeot’s problems were partly management related but mostly reflected the wider European market.
One year ago Lakshmi Mittal was sitting nervously on a plane to Paris. He was on his way to an emergency meeting with the president of France, after a minister had threatened to nationalise his company’s French operations.
“The European automotive crisis largely explains the situation of PSA Peugeot Citroën, although FO does not absolve the management, who have accentuated the crisis with years of strategic mistakes,” the union said.
William Desprez, who runs the eastern operations for Menway Carrières, a French human resources group that deals mainly with corporate restructurings, says that the French unions are increasingly willing to acknowledge serious problems.
“You don’t see now – as you used to – a very strong movement by the unions. There is more of a common search for a solution with employers to what has become a real industrial crisis in France,” he says.
The French government has been markedly less vocal as well, sending out a strong message that it is trying to improve competitivity.
The government this year put in place a law which for the first time created special procedures for companies to follow when negotiating working hours, pay and overtime in a downturn.
“This is not about going back to the grand plans of the 1960s and 1970s,” said President François Hollande. “Our policy is neither liberal nor dirigiste, it is not Rhinelandish or Anglo-Saxon. It is French, pragmatic.”
François Vergne, employment lawyer and partner at Gide Loyrette Nouel, says that the law, which came into place in June, was already providing new legal instruments to create more flexibility in the marketplace.
“The procedure for restructuring and laying off workers has got clearer and companies have more power to negotiate with unions about wages, overtime and internal movement as an alternative to dismissals as well,” he says.
Restructurings are still not easy, however. Actually firing workers is still challenging, and downsizing must still be done through voluntary redundancies and retirements. Lay-offs still need to be signed off by the government.
“There is now more flexibility in terms of negotiating with the unions and the government has also been making less noise this year.”
- Michel Martinez, economist at Société Générale
“There is now more flexibility in terms of negotiating with the unions and the government has also been making less noise this year,” says Michel Martinez, economist at Société Générale. “But the changes have only gone so far.”
“If a company really needs to adjust because there is a structural change – for example if capacity drops by 40 per cent for some reasons – it is still very difficult to make big changes,” he adds.
For some, the more tranquil attitude to restructuring in France is more a sign of weariness from unions, the government and ordinary people than anything else.
“The fact is, every time you open the newspaper there is another one,” says Thierry Grimaux, partner at Valtus Transition, an interim management group involved in restructurings. “It is hard for people to get up in arms about every single one.”
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