Controversy over Perrier redundancy plan

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In 2003, the Perrier mineral-water company (part of the Nestlé group) announced 350 job losses in France through early retirement (the fourth round of redundancies in recent years) and signed an agreement on the issue with two minority trade unions. The majority union at the company, CGT, decided to invoke a new right to challenge collective agreements signed by unions without majority support, introduced by legislation in 2004, hoping to have the early-retirement agreement cancelled. However, external and internal pressures resulted in CGT withdrawing its challenge in September 2004. As a result, the redundancy plan can go ahead but the future of Perrier remains uncertain.

After a year-long takeover battle, the Swiss-based Nestlé group, which among other activities is the world’s largest bottled-water company, finally succeeded in purchasing the French mineral-water company Perrier in 1992. After a decade of good results and a successful break into the US market, Perrier’s financial situation began to falter just as Nestlé was about to buy it. A US consumers’ association revealed that some bottles of Perrier contained traces of benzene and the company was forced to pull out of the US market, which accounted for 70% of its sales abroad. It was at this time that the Nestlé group paid more than EUR 2 billion for the brand, a price which, at the time, was widely considered somewhat high.

Shortly after the purchase and faced with a rapid fall in turnover, Nestlé’s water division, Nestlé Waters France, implemented successive redundancy plans at Perrier in an attempt to return the company to profitability :

• three months after buying Perrier, the Swiss group implemented its first redundancy plan involving early retirement and voluntary departure for 428 of Perrier’s then workforce of 2,400;

• the second plan, implemented in 1995, aimed to shed a further 275 jobs, also through early retirement and voluntary departures; and

• the process of reducing the workforce continued in 1998, with a third plan cutting a further 334 jobs.

As a result, within the space of 10 years, Perrier cut its workforce by a third and by 2003 employed only 1,600 workers.

CGT challenges redundancy plan

The company has returned to profitability since 2000. However, Nestlé Waters France management and shareholders continue to view these profits as insufficient. The company thus announced a fourth round of redundancies in late 2003, based solely on early retirement. It targets 356 jobs and is part of a larger workforce-reduction exercise intended to shed 1,047 jobs through early retirement throughout the whole Nestlé Waters France group. Perrier management’s goal in implementing this plan is to 'increase annual production by 600,000 bottles per employee. By comparison, production at Italy’s San Pellegrino stands at 1.8 million bottles.'. An early retirement agreement was signed in July 2003 by the French Confederation of Professional and Managerial Staff-General Confederation of Professional and Managerial Staff (Confédération française de l'encadrement-Confédération générale des cadres, CFE-CGC) and the French Democratic Confederation of Labour (Confédération française démocratique du travail, CFDT), without the support of the General Confederation of Labour (Confédération générale du travail, CGT) which had won 83% of votes cast at the last workplace elections of employee representatives at the company. On the strength of this result, in late July 2004 CGT decided to challenge the early retirement agreement under the May 2004 'Fillon law' on social dialogue (FR0404105F).

This law entitles one or more trade unions representing over 50% of a company’s employees to challenge a collective agreement signed by other unions. This right to challenge is designed to develop 'industrial democracy' within companies.

During consultations on the draft Fillon legislation, both CGT and CFDT opposed the proposed right to challenge agreements, arguing instead for majority agreements, which to be valid would have to be signed by unions representing the majority of employees. The General Confederation of Labour-Force Ouvrière (Confédération générale du travail-Force Ouvrière, CGT-FO), CFE-CGC and the French Christian Workers’ Confederation (Confédération française des travailleurs chrétiens, CFTC), together with employers’ organisations, were against a majority-agreement system.

Had the Fillon law opted for the majority-agreement principle, the Perrier deal on early retirement would not have been possible without the agreement of CGT. Under the current legislation, the only way that CGT can register its opposition is by invoking the right to challenge. However, the union states that its refusal to sign on the agreement was not solely driven by a desire subsequently to invoke the law: 'We were very reluctant to lay our last card on the table. We would have been only too happy to sign had the agreement been based only on voluntary redundancy for those over the age of 55. However, the scheme plans to refocus on the core business, which will lead to the outsourcing of areas such as catering and security services.'

CGT withdraws challenge

The dispute ended on 28 September 2004 with CGT agreeing to withdraw its challenge to the early-retirement agreement. The compromise, which was agreed after the Minister of Economy and Finance, Nicolas Sarkozy, personally intervened, carries guarantees from the Nestlé group on the future of Perrier if the agreement is implemented. The CGT general secretary, Bernard Thibault, had attempted to soften the CGT's position at Perrier in order to find a way out of the situation. However, a workforce referendum held at Perrier was a determining factor for CGT, with a majority of employees opting for the withdrawal of the challenge.

The plan to reduce the workforce through early retirement can now go ahead and the future of Perrier will depend on the company’s ability to boost productivity. However, the compromise is a tenuous one for several reasons. First, a threat of Perrier being sold off has not been entirely lifted since management, particularly at the Nestlé group, is still saying, despite the implementation of the redundancy plan, that it still might divest the company unless Perrier’s profits improve. Second, in the area of industrial relations, a change in Nestlé Waters France’s legal status is causing concern not just for CGT but for all trade unions. Under this reorganisation, the various French production units are to be broken up into subsidiaries, which means that the central works council (comité central d’établissement) will disappear. The proposal is to break the group up into five distinct subsidiaries: three production plants (Vittel-Contrexéville, Quezac and Perrier), a marketing and distribution company and a business services, accounting and information-technology company. These factors combine to make Perrier’s future an uncertain one.

Commentary

The Perrier dispute is without a doubt 'a thoroughly French affair', to the extent that it highlights some uniquely French characteristics. First and foremost, it bears witness to how difficult it is to boost social dialogue and shows that the Fillon law has not made matters any easier. Second, the importance of the state in resolving 'private disputes' has again been brought into sharp relief. Once again, as was the case recently at Alstom (FR0310101N) and Sanofi (FR0404106F) for example, it required the intervention of undoubtedly the government’s most free market-oriented minister to resolve the dispute at Perrier. However, the most surprising aspect of the Perrier dispute is that almost no-one pointed out the anachronism of an agreement on early retirement, when the major thrust of the 2003 pensions reform (FR0309103F) was to extend people’s working lives and avoid using age-based measures as a way of adjusting employment levels. The Perrier agreement appears to run roughshod over the spirit of this legislation. From this perspective, CGT’s opposition to the deal could have expected to find favour with advocates of pension reform. This was emphatically not the case. (Carole Tuchszirer, IRES)