EU continues to feel impact of Renault crisis

In April 1997, Belgian and French courts condemned the actions of French car marker Renault in announcing the closure of its Belgian plant without prior consultations. The European Union has instituted a number of processes to assess how the situation of workers affected by large-scale redundancies or business transfers can be improved. At the same time, uncertainties remain over how to address the problems of European industries facing financial difficulties in times of budgetary stringency.

European Parliament and European Commission urge further legislative action

In the wake of Renault's announcement of the closure of its plant at Vilvoorde (EU9703108F) European trade unions, the European Commission and the European Parliament have called for tougher measures to protect the interests of employees in the event of large-scale redundancies, business transfers and relocation. In an address to the European Parliament (EP) in March, Padraig Flynn, the commissioner responsible for industrial relations, employment and social affairs, reminded member state governments that they had rejected such tougher measures in 1992. While he argued that existing legislation covered the situation at Renault, there had to be a serious question mark over the deterrent effect of the level of sanctions currently available. He told MEP s that he would "propose to the Commission that we proceed in the coming weeks with the first stage of consultations with the social partners at European level on this issue and I sincerely hope that we are able, through this action, the strengthen the protection of workers" (reported in RAPID, 11 March). He also pronounced himself in favour of the institution of general rules to complement existing measures, aimed at making information and consultation compulsory at member state level.

The EP experienced uncharacteristically noisy scenes as demonstrators supporting the workers at Vilvoorde occupied the public gallery. The majority of the Parliament condemned the French car maker's actions. Pauline Green, the leader of the Socialist Group, warned that the problems facing the car industry could be an indication of the shape of things to come in other sectors of the European economy and argued that it was up to the European Union to insist that companies receiving EU funds acted responsibly. John Donnelly (MEP), the European Parliament's rapporteur on the issue, argued that the European Union needed a specific strategy for the European car industry. This was to be achieved by granting more financial resources to support the role of the existing "Industry/research task force" on the "car of tomorrow", and by setting up a high-level working group whose members would include industrialists, component manufacturers, trade unions and users. He cited the example of the "1992 partnership for the generation of new vehicles" set up by the Clinton administration in the USA. This task force has substantial funds to support the US car industry.

The problems facing the European car industry

The problem of overcapacity facing the European car industry is immense, with the Economist's Intelligence Unit estimating that capacity will grow eight times faster than demand up to 2000. Analysts argue that European car makers need to become more cost-efficient while producing models faster. They are facing ever-increasing competition from Japan ese and Korea n manufacturers locating in Europe, as well as low cost plants in Central and Eastern Europe. More job cuts are seen to be likely as the industry prepares for all-out competition with the expiry of voluntary quotas which are currently limiting Japanese exports to Europe until 2000. The two French car makers, Renault and Peugeot, are seen to be particularly threatened because of their comparatively small size. They are also seen to be more dependent on the European market than rivals FIAT and Volkswagen. Their home market is crumbling after the expiry of state buying incentives. An analyst at Salomon Brothers argued that "they run quite a few plants considering how small they are ... it is an expensive structure to support" (reported in Reuters, 18 March 1997).

Financial analysts assessing the situation at Renault argue that the car maker's actions have not been tough enough to solve its overcapacity problems. Its losses are estimated at some FRF 5-6 billion in 1996. Renault's loss account for 1996 includes an FRF 2.4 billion charge to close Vilvoorde, and some analysts have argued that the loss estimates produced by Renault were based on "guesstimates" rather than fact, to feed the crisis atmosphere (reported in Reuters, 19 March 1997).

In defence of his announcement of the closure of its plant at Vilvoorde, which he argued was irrevocable, Renault chair Louis Schweitzer said he had had no other option in view of the company's financial situation. He cited the 1,900 job losses at a Volkswagen plant near Vilvoorde in 1995 as symptomatic of the problems in the industry.

Schweitzer meets union leaders

Mr Schweitzer met union representatives "on neutral territory" at the town of Beauvais in northern France on 19 March, reiterating that management's decision was irrevocable. Speaking after the meeting, one union representative complained that Mr Schweitzer had been "like a recording", repeating everything he had already said. Union leaders urged workers to keep up the pressure, arguing that the meeting had given some indication that the timetable of the closure of Vilvoorde could be flexible. They insisted that the factory stay open until a buyer is found. Unions argued enough work could be created to keep Vilvoorde open if hours at Renault across Europe were reduced by 10%.

In a statement issued by Mr Schweitzer after the meeting, he merely conceded that there would be further talks on internal transfers to ease the hardship caused by closure. It emerged in early April that management at Renault's subsidiary in Spain in fact expects to introduce third shift, lengthen the working day and introduce Saturday shifts to make up for closure of Vilvoorde (Gaceta de los Negocios, Spain, 9 April 1997).

Demonstrators take concerns to the heart of the EU establishment

Sunday 16 March had seen another mass demonstration in Brussels, at which 50,000 people (according to police figures) from across Europe demanded EU action to defend jobs. With banners carrying slogans such as "This Europe - no thanks" and "Europe without frontiers - yes, Europe without jobs - no", demonstrators appeared to place the blame for the situation at Vilvoorde at the doorstep of the European establishment.

In the light of the growing unrest among workers across the European Union, signalled by the repeated displays of solidarity for the Vilvoorde car workers and the actions of miners (DE9703104F) and steelworkers (DE9704207F) in Germany in previous weeks, the informal Internal Market Council of Ministers, which convened on 18 March, called for an improvement of the political coherence between policies aimed to establish the internal market and other EU policies. Earlier in the week, the informal Labour and Social Affairs Council of Ministers had reached the following conclusions:

  • a meeting with EU social partners to discuss the setting up of a code of conduct concerning company closures and relocation by EU multinationals was to be arranged by the Dutch presidency for 15-16 March, chaired by Dutch employment and social affairs minister, Ad Melkert. Mr Melkert argued that although this code would not be binding, employers could commit themselves to consulting their employees in the event of wide restructuring. This would be "a step forward without precedent";
  • an examination was to be carried out by the Commission of the impact of Community aid on location decisions; and
  • European Commission was to examine the need for a mediation mechanism to settle transnational differences between companies, as a matter or urgency.

Emilio Gabaglio, the general secretary of the European Trade Union Confederation (ETUC), said after the meeting that it represented an" initial answer to the question firmly put by ETUC, which is of the verification of existing provisions in matters of the guarantee of workers rights in case of company closure or restructuring, as well as their reinforcement, including with penalties. This first answer, even if it signals an awareness of the size of the problem, is however not enough, nor is it up to the threat raised." ETUC pronounced itself concerned about the lack of mention of the problems of the automobile industry.

Belgian and French courts rule against Renault

On 3 April, a Brussels industrial tribunal ruled that Renault had contravened the rules on information and consultation when it announced the closure of the plant. Under the terms of a judgment handed down on the following day by a French court in Nanterre, Renault is barred from pursuing "even through subsidiaries, the closing procedure of the Vilvoorde plant until it has fulfilled its obligation to inform and consult its European Works Council". The French court said consultations were necessary as the decision concerned "Renault's strategic orientation and was a major change in a European Subsidiary that would have repercussions at European level". The court stated that the company had failed in its duty to inform employees of the impending closure. Renault immediately stated that it would appeal against these rulings and argued that they would make no difference to its plans - highlighting that the decisions did not make any judgment on the merits of the closure. Management stated that it believed it had complied fully with Belgian laws but would now start the consultation procedure.

ETUC welcomed the courts' rulings and in a press release issued on 14 April stated that Renault's appeal against these judgements would not suspend the effect of the rulings, which meant that management had to reassess the closure procedure and "return to square one and restart the process involving information, expertise, consultations and negotiations prior to any decision making". ETUC calls for measures to strengthen and amplify existing legislation (on European Works Councils, collective redundancies and rights in case of company transfers) and create forums for consultation about industrial policies in key sectors affected by EU economic integration and the globalisation of the economy. The press release calls for governments to reach agreement on these issues at the Labour and Social Affairs Council taking place on 17 April.

To mark the judgments of the French and Belgian courts, trade unions at Renault organised a day of action in France, Spain and Belgium, and workers took to the streets of Brussels in support of employees at Renault Vilvoorde.

Vilvoorde workers vote to return to work

On 10 April, a majority of Renault workers at Vilvoorde voted to return to work after a five-week stoppage. Of 3,100 employees, 2,721 took part in the ballot and 68.7% backed a union recommendation to return to work. This was seen as part of strategy to begin lengthy negotiations on the terms and conditions of mass dismissal. it was also felt that staying out longer could have been held against the workers. Unions said they would sue Renault, to force the car manufacturer to pay out wages to workers who had officially stayed on the payroll during the strike. Workers would repay unions any strike pay received. It is estimated that this could cost Renault BEF 65 million.


Despite the rulings by the French and Belgian courts in support of the claim by the workers at Vilvoorde that they should have been informed and consulted about the decision to close Renault's Belgian plant, there was little to cheer workers in the beleaguered European car industry. While German miners succeeded in securing a "stay of execution", there are indications that we have not yet seen the end of rationalisation, company relocations and redundancies. The chair of Daewoo electronics and the management at BASF, Antwerp added to Belgian and European woes in March, when they called upon EU and member state leaders to address the issues of high social costs and the creation of a "suitable business environment to attract investment and boost job creation".

Unions equally have called for cuts in the indirect costs of employment, working time reductions, and policies to encourage economic growth, rather than belt-tightening. At the same time, member states have, in the view of some commentators, tied their hands with the commitment to introduce a single European currency, and the realisation by many that the price of not achieving this goal would be even higher. A representative of trade unions in Germany, a country currently struggling to meet the EMU convergence criteria, has stressed that the unions continued to support the timetable for the single currency, but argued that entry requirements should be eased to reduce the burden on workers (reported in the Irish Times, 28 March 1997).

In a recent issue, the UK magazine, the Economist, points to what it sees as being the ultimate irony for "Eurosceptics": the encouragement by the European Commission of the greater labour market flexiblity, deregulation and free market logic they so ardently support. It argues that 10 years ago there would have been cries for state subsidy to keep plants such as Vilvoorde open. Since then, it has been European Commission actions which have: supported free markets in Europe; rejected many demands for subsidy; and tried to fight cartel building. The Economist argues that, despite public pronouncements criticising fiscal and social dumping, the Commission appears to be bowing to the inevitable - globalisation and the growth of international trade. It is argued that business leaders are doing just what the single market encourages: treating Europe as one giant area and rationalising production across boundaries. According to the Economist, the second force for freer markets is what it calls "the Eurosceptics worst nightmare": the single currency. The article quotes Leon Brittan (the External Trade Commissioner): "European monetary union is forcing European countries to adopt Thatcherite policies". Even governments that had resisted reducing public sector spending are now adopting austerity measures to meet the Maastricht criteria and, it is argued, governments are beginning to realise that they will have to have flexible labour markets. The Economist quotes the Commission's 1996 report which "called for greater flexibility, but did not mention the social chapter".

The apparent popular backlash experienced recently against the perceived lack of coordination of internal market with social and employment policies, has shown that much remains to be done by European institutions and member state governments in the run-up to the next Treaty changes due to be decided by the Intergovernmental Conference later this year. (Tina Weber, ECOTEC)

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