http://www.testosteronepit.com/home/2013/2/8/french-socialist-nightmare-the-state-cannot-do-everything.html
French Socialist Nightmare: 'The State Cannot Do Everything'
FRIDAY, FEBRUARY 8, 2013 AT 7:53PM
The preannouncement came Thursday evening: PSA Peugeot Citroën, France’s largest automaker, would have a write-down of €4.7 billion. On top of a hefty operating loss. It would be colossal. An all-time record. Rumors spread immediately that PSA would need a bailout. The second in four months.
PSA passenger car sales in France dropped nearly 17% in 2012 from an already awful 2011. In January they dropped another 16.7%. Sales for all automakers dropped 15%, and PSA’s market share had eroded further. Kia-Hyundai sales jumped 21.2%, the only major automaker with gains. Even Volkswagen Group got clobbered: down 23.9%. PSA isn’t internationally diversified enough. It doesn’t have much in China and nothing in the US, the largest markets in the world, both growing. It’s mired in Europe where auto sales have ground to a halt. It’s bleeding €200 million a month. It’s trying to lay off 8,000 workers and shutter its plant in Aulnay-sous-Bois. And its Banque PSA Finance was bailed out last October with €7 billion in taxpayer money.
The government was so worried that it was actively studying a bailout, sources told theLiberation after the losses were announced. It was just hypothetical. “But if a capital infusion would become inevitable, the state could participate,” the source said. Instantly, a cacophony of discord erupted—within the Socialist government.
Another chapter in the saga of the deindustrialization of France—a process that has afflicted France, like other developed nations, for decades as manufacturing has wandered off to cheaper countries. But now there’s a near national consensus: the state needs to step in and stop it, according to a poll that CSA conducted for Les Echos and the Institut Montaigne....
The same Institut Montaigne that had shocked the establishment last April with a newFrench Paradox: employees in France were more dissatisfied with their jobs and more stressed at work than their counterparts in the rest of Europe—despite highly protective, “dense and complex” labor laws that allowed the French to work fewer hours, work less often over the weekend, and have a “less sustained pace of work.” And it dared to wonder if the sacrosanct labor laws were still protective, or if they’d become counterproductive even for employees. Gasps all around.
Deindustrialization has been on the front burner since the presidential campaign last year. But now, in the poll, it came down to a single question: Is the decline in manufacturing a phenomenon that can be reversed? The resounding response spread across all professional levels, all ages, and the entire political spectrum—78% of the respondents said yes.
The French expect the government to do “the maximum” to prevent plant closures,explained Jérôme Sainte-Marie, director of CSA’s political opinion division—something that those on the extreme right and left had been clamoring for all along. Now they “find themselves comforted” by the survey results, he said. And it puts the government in a quandary.
So far, it has shied away from nationalizing troubled plants. A risky path: the phrase by Lionel Jospin that “the state cannot do everything” was “absolutely impossible to maintain,” Sainte-Marie said. “Public opinion doesn’t want to hear it.”
He was referring to a Socialists nightmare. Jospin, Socialist Prime Minister from 1997 to 2002, had admitted that he could not prevent layoffs at a Michelin factory, that the state couldn’t do everything (“l’État ne peut pas tout”). A phrase—or a concept, rather—according to some political soothsayers, that contributed to his humiliating defeat in the 2002 presidential election. He was trounced in the first round by right-wing Jean-Marie Le Pen, which forced the left to vote for Jacques Chirac in the second round just to keep the unpalatable Le Pen out. An unforgettable horror story still for the Socialists.
For a Socialist government to admit again that the state couldn’t do everything, that some layoffs and plant closures would be allowed, was fraught with perils. During the presidential campaign, they’d promised the “reindustrialization” of France, and “the French took them by their word,” said Sainte-Marie.
So what to do about PSA?
“This company cannot, must not disappear,” said Budget Minister Jérôme Cahuzac Friday morning during an interview. “We have to do what we have to do so that it survives.” He’d already worked out the details: the bailout money would come from the state-owned Strategic Investment Fund (FSI).
Minutes later, Finance Minister Pierre Moscovici disagreed: “Jerome Cahuzac talked about a theoretical scenario and the tools available to the state,” he said. But “such a state bailout is not being considered, is not necessary, and would not add anything.” Sources in his entourage agreed, “A capital infusion by the state is not on the agenda.”
By midday, Prime Minister Jean-Marc Ayrault jumped into the fray. A bailout was not “on the agenda,” he echoed. PSA hadn’t requested it. Though there was “a tool, the FSI,” that could do it. But “this question hasn’t been raised today. Therefore, there is no question.” But if necessary, he grumbled, PSA would have to “be saved at all costs.”
And so continues the saga of the decline of the private sector à la Française. Tuesday morning, the 168 employees of automotive component maker DMI in Vaux, a tiny town near Montluçon in the Department of Allier, smack-dab in the middle of France, rigged about ten gas cylinders throughout the factory they’d been occupying and threatened to blow it up—unless their demands were met. Read.... French Workers Threaten To Blow Up Their Factory.
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http://www.testosteronepit.com/home/2013/2/6/french-workers-threaten-to-blow-up-their-factory.html
French Workers Threaten To Blow Up Their Factory
WEDNESDAY, FEBRUARY 6, 2013 AT 6:21PM
Tuesday morning, the 168 remaining employees of DMI in Vaux, a small town near Montluçon in the Department of Allier, smack-dab in the middle of France, rigged about ten gas cylinders throughout the factory they’d been occupying and threatened to blow it up—unless their demands were met. Another day in the decline of the private sector à la Française.
Formerly named Brealu, the foundry manufactured cast-aluminum intake manifolds, suspension arms, steering pump housings, and other automotive components. Among its customers: Renault, German heavy-truck maker MAN, US automotive component supplier BorgWarner, and French conglomerate Alstom. Hobbling along on its last leg, the foundry was acquired by Diversified Machine Inc. (DMI), a worldwide automotive component supplier, which itself was acquired by US private equity firm Platinum Equity. Along the way, 40% of the employees at DMI in Vaux were axed.
“We specialize in acquiring operationally complex businesses, finding undiscovered opportunity, and creating value,” Platinum Equity says on its website. But it doesn’t always work out.
The DMI operations in Vaux ran aground in France’s private-sector crisis. French automakers, already mired in a morose industry, were unable to compete with foreign brands. While Hyundai, Kia, and some German brands experienced major sales gains in France last year, Renault’s sales collapsed by 20%. So Renault, which had been buying about half of DMI’s production, slashed its orders. And on June 25, 2012, Platinum Equity had had enough. It sent DMI to the Tribunal of Commerce in Montluçon to seek bankruptcy protection.
The Tribunal granted protection for six month, in the hope that an acquirer could be found in the interim. If not, the Tribunal would seal DMI’s fate on February 21. Liquidation!
“We are once again facing an unbearable human and economic tragedy over the loss of manufacturing jobs in our region,” wrote National Assembly member Bernard Lesterlin at the time, a Socialist in whose district DMI was. He talked with members of the board, questioned Productive Recovery Minister Arnaud Montebourg “on this painful issue,” and promised a meeting with “all local stakeholders” in order to save the remaining 171 jobs.
Then a potential buyer emerged: Gianpiero Colla. He’d been acquiring tottering automotive component makers. Hope! He’d make an offer, he’d save the jobs.
But on January 18, he announced that he would not be able to put together an offer unless the customers of DMI, particularly Renault, guaranteed that they would purchase sufficient quantities. Enraged, the remaining 170 employees clamored to get the government involved. To induce Renault to commit to more purchases, they decided, ironically, to stop all shipments to all customers.
Then on Monday, February 4, Colla announced that he wouldn’t make an offer; he hadn’t been able to get Renault to guarantee sufficient purchases. The deal was off. The company would be liquidated on February 21.
Tuesday morning, the employees, now down to 168, placed about ten gas cylinders inside the plant and rigged them in a way as to turn them into bombs. The entrance to the factory was blocked by barricades of old tires and a burning pile of pallets. Angry men milled around. Photos of the gas-cylinder contraptions circulated. Some officers of the Gendarmerie, discretely deployed at a distance, did nothing.
“We all have worked for the company on average for 30 years, we saw it evolve, it’s our baby,” said Gabriel Gavin of DMI’s union, the CFTC. “If our jobs disappear, the plant will disappear with us.”
A large handwritten sign explained the deal: “DMI Platinum killed us. Renault, MAN, BorgWarner finished us off. They must pay 50,000 €/P.” In other words, the desperate workers threatened to blow up the factory unless they were paid €50,000 per person.
“We want the American fund Platinum, which put us into this situation, to come back to the negotiating table,” demanded Didier Verrier, secretary of the company’s union committee. “But not for nothing. We won’t discuss anything less than €50,000 per person.”
Extortion. Not exactly a helpful message for the private sector just when investments in factories and jobs were needed more than anything else. That the Gendarmerie refused to intervene sent another message: this type of extortion is tolerated. And investors were once again scratching their heads.
OK, the workers were just trying to get everyone to focus on the issue—namely their jobs or €50,000 per person. It worked. Wednesday morning, National Assembly member Lesterlinshowed up at the factory. Instead of telling the gendarmerie to arrest the workers and remove the bombs, he told the workers that the negotiations between Renault and Colla had not been broken off, after all. And a meeting was scheduled for next week at the Ministry of Productive Recovery with Colla and representatives of DMI’s customers.
Whatever success or payout this might lead to, it won’t heal the French automakers so that they can build cars that the French want to buy in larger numbers. It is a discouragement for investors, another nail in the coffin of the private sector. And Renault, well, it now has another reason to shop for its components in China where much of the world’s component industry has landed.
It put the Socialist government in a quandary. While it promised to side with workers, it is also worried about their “radicalization” and has instructed police intelligence services to spy on them. Not exactly a campaign promise. Read.... French Government Fears ‘Social Implosions Or Explosions’
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http://www.testosteronepit.com/home/2013/2/5/french-government-fears-social-implosions-or-explosions.html
French Government Fears 'Social Implosions Or Explosions'
TUESDAY, FEBRUARY 5, 2013 AT 5:22PM
The daily drumbeat of layoff and plant-closure announcements in France has been riling up desperate workers who stand to lose their livelihood without much hope of finding a job elsewhere as unemployment has hit 10.5%. But now the government is worried about a “radicalization” of these angry workers. A major quandary: on one hand, the Socialists promised during the election to side with the workers; but on the other hand, they must somehow figure out how to create an environment where the private sector can survive.
And the private sector is gasping for air. The Services Purchasing Managers’ Index fell to 43.6 in January, from 45.2 in December (below 50 = contraction), the fastest rate of contraction since March 2009. Particularly worrisome was the steep decline in employment. Manufacturing was even worse. Its index fell to 42.9 in January. New orders plunged at the fastest rate since March 2009, with domestic demand the primary culprit. Employment skidded as excess capacity led companies to slash their headcount.
That these references to March 2009, the dark days of the financial crisis, keep cropping up in economic data is troubling. The report speaks of a “deepening malaise” and “a broad-based deterioration in the private sector” with “significant headwinds,” “accelerated job cutting,” and “heightened levels of uncertainty.” President François Hollande and his government should be in panic mode.
The private sector is anemic in France. Based on the 2013 budget, the central government will contribute 56.3% to the economy. The remaining 43.7% is spread over local and regional governments and finally the private sector—that is shriveling with the relentless de-industrialization of France.
Plant shut-downs and layoffs, or merely the announcement of these events often months or even years down the road, make bold headlines. Video clips of protests associated with them show up on TV, with angry men and women blocking the site. There are images of fires and mayhem. Managers are taken hostage. Politicians weigh in gravely and speak of “dialogue.” Layoffs and plant closures don’t go down smoothly in France.
A series of big-name companies, some of them part-owned by the state, has become part of the nightly layoff blues: Air France, steelmaker ArcelorMittal, Texas Instruments, Goodyear, refiner Petroplus, or automakers PSA PeugeotCitroën and Renault, whose unit sales in France had plunged 17% and 20% respectively last year. But it doesn’t stop there. Now home sales are grinding to a halt [read... The Next Shoe To Drop In France].
The numbers are adding up: in 2012, according to Trendeo, which tracks the creation and destruction of jobs in France, 266 industrial plants were closed last year, a 42% jump from 2011! Since 2009, a total of 1,087 old factories were shuttered while only 703 new ones were brought to life, for a net loss of 384 plants. And these new factories have on average 8.5% fewer employees than factories that are being shut down.
Just how deeply the government is worried about the growing labor unrest emerged during an interview on BFMTV on Tuesday. And not in a propitious location: Interior Minister Manuel Valls was discussing the hunt for Islamist terrorists in France—efforts that the government has redoubled since its military involvement in Mali—when suddenly the topic shifted to the government’s fear of “excesses and violence” during the next labor-related demonstrations.
“Social anger”—meaning, anger by unionized workers—“as a consequence of the financial and economic crisis, job insecurity, unemployment, and layoffs is here and has been rumbling for years,” admitted Valls. “But what we’re seeing today are less social movements but social implosions or explosions.”
Turns out, the government is already preparing for them. A memo to that effect, dated January 30, bubbled to the surface. Sent to regional directors of the police intelligence service, it underlines “the risks of incidents” or possible “threats to production equipment in case of radicalization of the conflict.” To get a handle on the situation, the government has instructed its police intelligence apparatus to gather information on the movements and to follow teetering companies “very closely” in order to anticipate a possible “radicalization” of the labor unrest.
Valls confirmed the police surveillance. “You have to carefully analyze it,” he said about the social anger. And that was the job specifically of the intelligence services of the police, he added. Ever the likeable Socialist, he found the right words. “We have to try to understand the reasons that push men and women into desperation,” he said. “Men and women who are in the process of losing their jobs.”
What about vandalism and destruction of production equipment often associated with these movements? “We have to try to understand them, but we cannot permit them,” he said firmly, as the interview drifted to the next topic: rising violence and property crimes against individuals.
The heightened police presence at these sites during times of labor unrest, often in unmarked cars, has the unions worried. And Bernard Thibault, Secretary General of the CGT, warned that it would be seen as a “provocation.” And so the second largest economy of the Eurozone enters into a phase where fear of a labor revolt hangs over every economic decision the government makes.
The unemployment rate in particular has become treacherous. While all countries use inscrutable statistical systems to make unemployment look better, France also has anadministrative tool: removing tens of thousands of people every month from the unemployment rolls for spurious reasons. Read....
http://www.france24.com/en/20130131-goodyear-plan-close-tyre-plant-france-amiens
Executives at a Goodyear tyre plant in Amiens, northern France, presented on Thursday a plan to close the site, which employs 1,173 workers.
"Closing the factory is the only option after five years of unsuccessful negotiations," said a French-language statement, which added that the plan had been presented to a works committee and would serve as the basis for further consultations with workers' representatives.
Henry Dumortier, chairman of Goodyear's French unit, said: "We are fully aware of the impact of the announcement we are making today and the plan's heavy consequences for staff, their families and local communities."
He added: "We are deeply disappointed that five years of negotiations were not enough to reach a compromise with representatives of workers at Amiens Nord. Today's announcement was the only option left to us."
Tyre production at the plant led to an aggregate loss in 2011 of 61 million euros ($83 million) according to Goodyear figures.
"Closing the factory is the only option after five years of unsuccessful negotiations," said a French-language statement, which added that the plan had been presented to a works committee and would serve as the basis for further consultations with workers' representatives.
Henry Dumortier, chairman of Goodyear's French unit, said: "We are fully aware of the impact of the announcement we are making today and the plan's heavy consequences for staff, their families and local communities."
He added: "We are deeply disappointed that five years of negotiations were not enough to reach a compromise with representatives of workers at Amiens Nord. Today's announcement was the only option left to us."
Tyre production at the plant led to an aggregate loss in 2011 of 61 million euros ($83 million) according to Goodyear figures.
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