Michelin announces profits and redundancies

In September 1999, the French tyre manufacturer, Michelin announced both increased half-yearly profits and a plan to cut 7,500 jobs - representing 10% of its European workforce - over three years. The announcement sent shock waves through the Michelin workforce and French politics.

On 8 September 1999, Michelin, the French-owned tyre manufacturer, announced higher returns: net half-yearly profits - excluding minority interests - rose by 17.3% to EUR 292 million, on a turnover up by 3.8% to EUR 6.49 billion; while the operating margin increased from 8.2 % of turnover in 1998 to 9.4% in 1999. Nevertheless, the Michelin group's management did not consider this performance satisfactory and wants to boost competitiveness by 20% and in particular to address a perceived area of vulnerability - prices. On the same day it announced that there would be 7,500 job losses in its European operations - 10% of its European workforce - over three years. The stock market marked its approval of both Michelin's improved performance and - in the words of the head of Michelin's European operations - the "European productivity drive strategy" by sending Michelin shares up 12.5% the day after the announcement. Financial analysts believe that Michelin is trying to reassure the stock market prior to an attempt to secure credit for the acquisition of a competitor. The French multinational must thus demonstrate its resolve to boost profits. The Michelin group, which has the extremely rare legal status of a "limited partnership with capital" (commandite par actions), giving total autonomy to management, is 30% owned by the Michelin family and 40% by British, US and Japanese pension funds.

No detailed redundancy plan yet

The redundancy announcement gave no indication of the targeted sites, except for the Wolber plant in northern France, with 450 workers, which has been slated for closure. According to a Michelin spokesperson, "even given the positive results, workers must mobilise to stave off competition", if the company is to boost its competitiveness (quoted in the Libération newspaper on 10 September 1999). Any and all plants in Europe could be hit by the redundancy measures. Of a total worldwide workforce of 130,000, just under 15,000 are in French plants. The multinational operates 47 European plants (27 in France, seven in Germany, four each in Spain, Italy and the United Kingdom, two in Hungary and one each in Sweden and Poland). However the exact numbers of workers employed at these plants is not known. The new Michelin redundancy proposals are not yet a formal redundancy programme (plan social) in the legal sense of the term. Over the past 15 years, 10 previous redundancy programmes in France have reduced the company's workforce by over half. The workforce in Clermont-Ferrand alone, the historic heart of the group's manufacturing activities, has been cut from over 30,000 to fewer than 15,000 over the same period in a town with a population of barely 200,000. Michelin has received substantial government assistance for its restructuring activities.

Fierce and divided reaction

Michelin's announcement of improved results combined with that of job cuts provoked extremely hostile reaction, first and foremost from trade unions and left-wing parties

The unions, against which successive Michelin management teams have continually fought, maintain that the latest developments are diametrically opposed to social dialogue. They state that workers who helped turn around the ailing economic fortunes of the company in the early 1990s and are now seeing their jobs jeopardised may feel betrayed. Many demonstrations against the redundancy plans took place at affected plants. Workers' representatives from other countries often participated in these activities, despite the fact that Michelin did not have a European Works Council in the weeks after the announcement (one was subsequently agreed in October), and international trade union bodies organised meetings of representatives from the countries affected (EU9911210N).

The left-wing parties in the coalition government came out strongly against the proposals, which they see as socially unworkable. The Communist Party viewed this situation as a typical example of the consequences of "globalisation" and demanded counter-action from the government and other political parties. The Socialist Prime Minister, Lionel Jospin, while condemning the redundancies, emphasised the fact that the government was unable to control the economic process and called on workers to mobilise in such a situation.

The opposition parties were guarded in their evaluation of the Michelin plan. Some condemned it, while others justified the painful nature of the measures by pointing out that they were consistent with a competitive economy.

The chair of the MEDEF employers' confederation expressed his total support for the Michelin plan, but qualified it with criticism of Michelin's "clumsy" handling of its announcement. Several weeks after the Michelin announcement, and when the controversy surrounding it had snowballed, several large companies (such as Renault and Carrefour) publicly expressed their support for the initiative.

Beyond the initial issues

The Prime Minister's reaction gave rise to opposition on two fronts. Firstly, the Communist Party and left-wing Socialists castigated the government's refusal to intervene politically in economic matters as a "neo-liberal" approach. Secondly, the government's appeal for worker mobilisation worried the parties of the right, who were outraged by such an initiative on the part of a Prime Minister.

The Prime Minister's stance was not supported by the parties forming the governing coalition either. The passage in the Prime Minister's speech where he acknowledged that government had very little power over economic matters was perceived as relinquishing some government and state control over national affairs, at a time when a major initiative - the statutory 35-hour week - had been undertaken and needed to be justified. The Prime Minister was forced to clarify the thrust of his first speech at a meeting of Socialist MPs where he unveiled new legislative initiatives, in particular to address precarious employment. The Michelin controversy arose just when the second 35-hour working week law was being discussed in Parliament and a "Michelin amendment" was thus inserted, obliging employers to have concluded, or be in the process of concluding, a working time reduction agreement before they can inform trade union representatives of their intention to make redundancies and draw up a redundancy programme (FR9910197N).

The Michelin affair has brought sharp differences within the Left on how the country should be governed to the fore. In mid-September, the Communist Party floated the idea of holding a joint employment rally with other left-wing parties. This rally, planned for 16 October, received only hesitant support from the Ecologists but none from the Socialists (FR9911120N). Similarly, a initiative by the CGT trade union confederation to hold a joint rally for employment on 4 October at the start of the parliamentary debate on the 35-hour week was not supported by the other main unions (FR9910114N).

Commentary

The end of the summer holiday period in France was characterised by both optimistic economic indicators and by stubbornly high unemployment. The issue of whether to use budget surpluses to create jobs, cut taxes or reduce public spending was very controversial. This period was also marked by the widely-supported struggle pitting small farmers against World Trade Organisation policies and the USA's embargo on certain French products. Public awarenesss has been raised over the issue of the globalisation of food production and food quality and its impact on local employment. The public is also following the debate between trade unionists, industrialists and politicians over the initial results of the first 35-hour working week law (FR9906190F).

In this context, Michelin management's twofold announcement has proven to be a catalyst for public opinion on the impact of globalisation and the pursuit of competitiveness on jobs in industry. The Prime Minister's long-awaited change in stance on the role of government, designed to usher in new direction in government thinking, has kickstarted the recurring debate on the relation between politics and the economy: are fresh employment policies really possible? does this issue distinguish left- and right-wing parties?

A change of direction by the Prime Minister might be justified by a survey indicating that 64% of French people would support government intervention to oversee and regulate redundancy plans, while 55% would also favour government intervention in mergers and acquisitions (reported in the La Croix newspaper on 20 September 1999).

Therefore, the French public does not view government intervention in the economy as inappropriate. Politicians will have to take this into account, as will employers, who could see the Michelin affair used as a counter-argument to their calls for a more liberalised economy for a long time to come. (Christian Dufour, IRES)