Alstom restructuring continues
In March 2003, Alstom, the French-based engineering multinational, announced a major Europe-wide restructuring plan which includes major cuts in its activities and 5,000 job losses. In July, management obtained shareholders' approval for an increase in capital as part of the plan, while employees from across Europe demonstrated in protest against the workforce reductions. The French government is intervening to support Alstom’s activity, enable the sale of assets and allow partnerships to be formed.
During a stormy meeting of shareholders of the Alstom engineering group on 2 July 2003, the multinational's chief executive, Patrick Kron, persuaded more than 98% of the shareholders present or represented to endorse an EUR 600 million increase in the group’s capital, one of the three pillars of the Alstom rescue plan presented in March (FR0306101N). This plan also includes the sale of assets (worth EUR 3 billion) and EUR 500 million worth of savings over the next two years, involving more than 5,000 job losses in Europe, over 2,000 of which will occur in France between now and 2005.
The shareholders vociferously challenged the management of the former chief executive, Pierre Bilger, and his alleged failure to produce an industrial development strategy. Mr Bilger nevertheless received a comfortable 'golden handshake' (EUR 5.1 million according to the Le Figaro newspaper on 3 July 2003). Shareholders are anxious about their shares in the group, which posted a loss of EUR 1.3 billion for the year ending 31 March 2003, together with a debt of EUR 4.9 billion, compared with EUR 900 million worth of shareholders’ equity. Alstom's share price is in free-fall (downn 90% in early July 2003 compared with the flotation price in 1999) and its capital has been reduced by 80%. Various complaints, moreover, are being dealt with by the courts: a small shareholders’ association has accused the company of false accounting; former employees who are victims of asbestos poisoning are taking the company to court; trade union representatives from the French Democratic Confederation of Labour (Confédération française démocratique du travail, CFDT), the General Confederation of Labour (Confédération générale du travail, CGT), and the General Confederation of Labour-Force Ouvrière (Confédération générale du travail-Force Ouvrière, CGT-FO) have brought a case before an industrial tribunal (conseils de prud'hommes), claiming wage discrimination due to their union membership; and a US subsidiary is alleged to have committed 'false accounting' to the tune of around EUR 50 million.
Despite the shareholders’ discontent and the opposition of employee shareholders, the arguments put forward by Mr Kron and his finance director, Philippe Jaffré, finally convinced the majority at the shareholders' meeting that their interest was best served by increasing the firm’s capital, as the alternative would be the inevitable takeover of the group by the banks, which would be very likely to require the rapid repayment of EUR 1.07 billion worth of bridging loans.
Also on 2 July, in response to a call by the Alstom European Works Council - which has representatives from 15 countries and 25 trade unions - a group of employees marched from the company’s headquarters to the shareholders' meeting. Trade union delegations participating in the demonstration represented Alstom staff from Belgium, the Czech Republic, Denmark, France, Germany, Greece, Italy, the Netherlands, Poland, Portugal, Romania, Spain, Sweden, Switzerland and Turkey. The delegation from the German Metalworkers' Union (Industriegewerkschaft Metall, IG Metall) comprised almost half the demonstration. Union officials from the various countries do not agree that the group’s employees should, as they see it, be paying the price of an industrial development strategy that they have always rejected. By taking their opposition to the redundancies to the European level, where group decisions are made, they aim to transcend the cultural differences between national trade unions and reject any attempt to place them in competition with each other.
The plan for the disposal of Alstom's assets is underway. According to the information provided to the shareholders’ meeting in July, the sale of property, the small turbines division (to the German-based Siemens) and various other assets accounts for half of the planned disposal of EUR 3 billion worth of assets.
The announcement of new and sizeable job losses due to Alstom’s restructuring in regions of France where the labour market was already depressed, has resulted in a mobilisation, not only among those employees who are affected by the cuts, but also among regional and local councillors in areas where Alstom plants are threatened with closure or considerable job losses. Furthermore, through the intermediary of those companies in which the state has retained its power of intervention, the government and the various ministries have acted to attempt to prevent Alstom going under, even though it is a private company. Nicole Fontaine, the Minister for Industry, has announced that the Gaz de France gas utility is likely to order two methane tankers from Chantiers de l’Atlantique, still an Alstom subsidiary pending its sale, while on 26 June, Sea France– a subsidiary of the French National Rail Company (Société nationale des chemins de fer français, SNCF) – ordered a car ferry from the same dockyard. Lastly, Areva (formerly COGEMA), also a state-owned company, has made an unexpected offer for Alstom’s transmission and distribution division.
The drastic restructuring of the Alstom group, although it will perhaps enable the group’s books to be balanced, does not, it is claimed by some observers, necessarily outline an industrial development strategy for a group which will in future reduced be to two areas of activity - energy production and rail.