Globalisation blamed for restructuring at Danone and Marks & Spencer

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In March 2001, under the pressure of economic and financial globalisation, the French-based food group Danone and the UK-based retail multinational Marks & Spencer announced a restructuring of their operations, including redundancies in France and the rest of Europe. The simultaneous announcement of job losses by the two companies resulted in an angry response and retaliatory action by French workers and their representatives, backed by politicians and the government.

The French-owned Danone food processing group opted to unveil its restructuring plan for its biscuits division in late March 2001 in the wake of a leak to the press in January (FR0102133F). The company's management has announced 1,816 job losses in Europe between 2002 and 2004, including the closure of two French plants (Calais in northern France and Evry in the Paris area). Almost simultaneously, the UK-based retailer, Marks & Spencer, revealed that it planned to close all 38 of its stores in continental Europe, including 18 in France– where the group has been present since 1975 – and to sell its two US subsidiaries.

Both companies outlined two essentially similar goals (or perhaps justifications) for their restructuring: to bolster margins in a competitive globalised economy; and to improve profitability to satisfy shareholders. The outcome of the restructuring is also largely the same, with redundancies in France, the rest of Europe and the wider world. Danone is cutting 800 jobs in France as well as 2,500 in the rest of Europe, including Belgium, the Netherlands, Italy and Hungary. Marks & Spencer's plan is more drastic, with 1,700 redundancies in France and a total of 4,400 worldwide. The only real differences between the actions of the two companies lie in the context and approach. Danone is undertaking restructuring in advance and has promised an exemplary "social plan" to accompany the redundancies. Marks & Spencer, on the other hand, is seeking to restructure its way out of a crisis situation and is widely perceived as giving little thought to those losing their jobs.

The two announcements have triggered strong reaction in France from the government, trade unions, elected political representatives at national, regional and local level, and associations. Members of the European Commission have also expressed concern over this issue.

Danone - a socially responsible company caught up in global capitalism?

Danone has long had an image as a "socially responsible company". While the company's management has implemented previous workforce-reduction plans, it has, to date, succeeded in redeploying most of the workers concerned and avoided compulsory redundancies. Antoine Riboud, who was head of the company until 1996, cultivated a reputation as a "socially-oriented boss". The company, which is now presided over by his son, Franck Riboud, has become an multinational corporation with the majority of its turnover and staff linked to operations outside France. France is no longer the main reference in terms of industrial strategy and human resource management. The fact that the company was required to reveal its restructuring plan on 29 March to a meeting of the group's European Works Council (or European Information and Consultation Committee) in Geneva was very significant. Despite commitment by the company's management to redundancy-assistance measures and to the industrial regeneration of the affected plants, the fact remains that the plan to restructure the "biscuits" division comes hot on the heels of the recent announcement of profits of FRF 4 billion for 2000. This explains the anger and disbelief expressed by employees.

The workforce responded to this announcement by organising demonstrations, strikes and occupations at affected plants. The various trade unions reacted in different ways. CGT and SUD called for a boycott of Danone products, while CFDT, CFE-CGC and CGT-FO opposed this move. In addition, CGT and CFTC criticised the redundancy provisions set out in the government-initiated "social modernisation" bill – soon to be redebated in the National Assembly (Assemblée nationale) - as insufficient (FR0101121F). More unusual has been the widespread reaction from many national, regional and local elected officials, as well as representatives of civil society, who are also advocating a boycott. The ruling Socialist Party is looking into the possibility of making redundancies more expensive for profitable companies and intends to table appropriate legislative proposals. The Prime Minister, along with several other members of the government, has come out against the redundancy plan.

The European Commissioner for Employment and Social Affairs, Anna Diamantopoulou, stated that: "In the space of a week we have seen brief announcements of redundancies involving 6,000 workers in just two companies. We cannot stay silent when faced with such decisions and their certain impact on the workers concerned and their families ... it is unworthy of Europe that workers should learn of their job losses via the press or a mere few minutes before the public announcement. Such behaviour hardly reflects well on the reputation of the company itself in the eyes of the consumers". Ms Diamantopoulou thus called for the rapid adoption of the proposed Directive establishing a general framework for informing and consulting employees in the European Community (EU9812135F). This draft Directive, tabled by the European Commission at the end of 1998, has met with hostility from several Member States, including the UK and Ireland, though there are currently signs that the blocking minority is crumbling (EU0012285F).

Marks & Spencer - restructuring on the hoof and without qualms?

The UK-owned Marks & Spencer, founded in 1894 and quoted on the London stock exchange as early as 1926, began its extension into continental Europe in the mid-1970s. The company saw its profits grow steadily from 1968 until the second half of the 1990s. However, starting in 1997, several warning signs began to emerge. Since then the company's share price has been tumbling (down 60% from its peak), net profits have fallen threefold and sales in France have been declining over the past two years. Two successive chief executives have attempted to stop the slide. The Belgian Luc Vandevelde, appointed in 2000, negotiated a bonus equivalent to his entire GBP 650,000 annual salary - payment has yet to be ratified by the salary committee in May - as the price for turning the company's fortunes around. Failure to do so led him to implement drastic measures and refocus the company's operations on the UK in a bid to apportion part of the proceeds (GBP 2 billion) of this restructuring exercise to shareholders. The announcement of the closure of the continental shops and sale of US operations came on 29 March. On that day, the company's definitive restructuring plan was presented to the central works council of the French subsidiary at an informal meeting with no set agenda a few minutes before the London stock exchange opened. Marks & Spencer shares jumped 7% on the day of the announcement.

The French government was quick to condemn the perceived harshness of the company's tactics and the Ministry of Employment and Solidarity decided to conduct an administrative enquiry on the way the plan was announced. Following an initially emotional and angry reaction, workers responded by demonstrating outside Marks & Spencer stores. The trade unions criticised the announced closure of the stores - blaming the group's chief executive - and called on workers to rally to save their jobs. A cross-union grouping is considering the organisation of a European-scale demonstration at the company's London headquarters. However, favoured strategies vary from one union to another. Only CGT, CGT-FO and Sycopa (recently disaffiliated from CFDT) took their case before the Paris district court to seek a ruling suspending the redundancy procedure on the grounds that the works council had not been informed in advance. The court ruled in favour of the unions on 9 April, and suspended the closure of the French shops until the company had fulfilled all its information and consultation obligations. Local elected officials from the ruling coalition of the Socialist Party, Communist Party and Ecologists in Paris and the regions rallied to the aid of Marks & Spencer employees by calling for a boycott.

Commentary

Globalisation and the deregulation of trade, foreign direct investment capital and financial flows have curtailed the control of both governments and worker and their representatives over decisions made by multinational firms. Industrial relations rules, including those governing workers' representative bodies are set by national labour legislation. In the light of the fact that European Union industrial relations legislation has not supplanted national legislation in this area, workers' representative bodies, notably European Works Councils (based on EU Directive 94/45/EC) are unable to address the issues raised by the restructuring of global firms. Individual countries themselves have divested some of their authority to the "invisible hand" of market forces, while trade unions have failed to find the appropriate response for genuine worldwide or even EU-level action, thus leaving big business a free hand. (Catherine Sauviat – IRES).

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