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  • Sep 3, 2014
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Unions declare war over Peugeot's plan to close Paris plant

Unlike their American counterparts who bowed to the inevitable, French unions vow to go down fighting to block carmaker's planned closure of Paris factory

PUBLISHED : Friday, 17 August, 2012, 12:00am
UPDATED : Friday, 17 August, 2012, 2:36am

When US carmakers slashed production capacity in exchange for government rescue four years ago, workers faced up to change. Though unions bargained hard for existing employees, they agreed to factory closures and cuts in wages and benefits for new hires. Thousands of workers accepted redundancy payouts and moved on, without a huge outcry.

In Europe it's different. Last month, after workers at French carmaker PSA Peugeot Citroen learned of company plans to close a plant in suburban Paris, union leader Jean-Pierre Mercier went on the attack. Within hours he was calling for a "shock campaign" to force chief executive Philippe Varin to keep the plant open.

"We have the power to make Peugeot back down, to preserve our jobs," Mercier, head of the hardline CGT union at the factory, told a crowd gathered by its gates. "We are a political bomb, a social bomb, and we intend to detonate."

The union is planning a long-term campaign of protest to keep the plant open, no matter the cost to the company. Other unions are more intent on extracting hefty redundancy terms for workers.

The battle in Aulnay-sous-Bois may be the first of many across Europe. European carmakers such as Peugeot, General Motors' Opel division and Fiat in Italy say they are finally ready to deal with the long-standing problem of overcapacity.

They want to close under-used factories and cut staff. Peugeot is leading the way, with a restructuring plan that includes axing 8,000 jobs by 2014. The firm has lost €200 million (HK$1.9 billion) a month in the past year and has no other choice, Peugeot executives say.

"We're indebted and unable to earn as much money as we're spending," said Frederic Saint-Geours, in charge of brands at Peugeot. "That's why we had to take this decision."

But in Europe, announcing changes and enacting them are very different things. French voters have a history of resisting job losses, and carmakers face huge obstacles to restructuring. President Francois Hollande has branded Peugeot's plans "unacceptable".

Aulnay's unions are bristling for a fight and its Socialist mayor has ordered Peugeot to find a new industrial employer for the site, threatening to expropriate the factory grounds if it fails. The plant - a rare place of worker pride in a region suffering from high unemployment and crime - employs 3,300 full-time workers and uses 7,500 sub-contractors around the region. Local officials say a closure could bring "social disaster".

"If you grew up around here, it's impossible not to know somebody who works or has worked at the plant, be it a mother, a father, a brother or a cousin," said Billel Ouadah, an Aulnay native, local centrist politician and work-site inspector.

"Many of those people will end up with no job and no economic prospects if the plant closes down. And as things stand, we have no clear idea what will come after Peugeot to help them get back on their feet once it's gone."

Compared to carmakers' restructuring in the United States, Peugeot's plan is relatively modest and its deal for workers generous. The firm says all workers will be offered new jobs of some sort. Half will be transferred to its factory in Poissy, another Paris suburb. The rest will be kept on-site if Peugeot can lure a new industrial employer to Aulnay, or transferred to other factories. Those who choose to leave will receive €1,000 for every year they have worked at Peugeot, and help towards job training.

"Restructuring in Chicago and Detroit was a totally different issue," said Karl Ostler, a director at FTI Consulting specialising in industrial restructuring. "Labour laws in Europe, especially France, are far stricter and unions are far stronger."

But Peugeot's offer does not impress many in Seine-Saint-Denis, the area in which Aulnay lies, where unemployment hit 12.2 per cent in the first quarter. In high-rise housing projects such as the "Estate of the 3,000" - named because it was built to house 3,000 worker families from Aulnay - a shutdown would mean closing off the main source of jobs for low-skilled young workers in a town where high-school dropout rates are twice the national average.

"Closing Aulnay would be a double tragedy," said Francois Asensi, a Socialist member of parliament for Seine-Saint-Denis and mayor of nearby town Tremblay-en-France.

"There is PSA's huge economic weight, of course. But there is also a social disaster because it would remove one of the last real sources of stability in the community."

A closure would also hurt the town's finances. Already deep in the red, its debt payments have doubled in the past four years to €90.4 million in a budget of €226 million.

"We stand to lose millions," said Christophe Lopez, an adviser to Aulnay's Socialist mayor Gerard Segura. He warned that the town would lose taxes from the company and from "hundreds of families that can no longer pay and have to rely on social services".

The government is trying to keep its distance from the dispute. In parliament, industry minister Arnaud Montebourg has criticised Peugeot's planned lay-offs, saying France has a "real problem" with its strategy, but the government has not sought to block the shutdown.

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