France vs US in a tale of two layoffs

Reuters

By Nicholas Vinocur and Bernie Woodall

PARIS/DETROIT, Dec 4 (Reuters) - Five years after JeffreyHand took a $100,000 buyout to leave Ford Motors, the U.S. autoindustry has surged back to profit and is once again hiring.Hand, who has spent the years living on his payout, has nowapplied to work at an auto parts supplier a few hours away fromhis old factory near Dearborn, Michigan.

Across the Atlantic, father-of-three Hassan Chnaiti took abuyout from French carmaker Peugeot earlier this year, as itprepared to close his plant near Paris. But having pocketed hisseverance pay, he will soon start work as a public bus driver,thanks to a job placement scheme funded by his former employer.

"Peugeot gave me a chance," said Chnaiti, a 34-year-oldimmigrant from Morocco with French nationality, who had workedhis way up to the rank of supervisor. "But I don't see much of afuture in this business for me."

Though separated by 6,000 km (3,700 miles), Hand and Chnaitihave much in common. Both spent more than a decade building carsand were squeezed as their respective firms, saddled with highlabour costs in ever more competitive markets, fought to regainan edge. Both their employers resisted a bailout from the state.And both men accepted buyouts to leave a company they referredto as their "family."

But the differences between their stories - some of themunexpected - highlight fundamental contrasts between running abusiness in the United States and France. Hand, a talkativemidwesterner, received almost double the lump sum that Chnaiticollected in Paris; indeed, the average severance paid by Fordin 2008 for its departing staff was markedly higher than the sumPeugeot has budgeted per worker this past year, a Reutersanalysis has found.

Despite, or perhaps because of this, Ford in the UnitedStates had a much easier time laying people off than Peugeot.Ford announced its major restructuring in 2006. Two years on, ithad closed eight plants and laid off nearly 40,000 workers. Overthe 17 months since Peugeot began its restructuring in July2012, the French firm is set to close just one plant and isstruggling to reduce headcount by just over 11,000, though itsays more cuts may be necessary. That makes it harder for thefirm to reinvent itself.

One key difference has been in the companies' dealings withtrade unions. Ford, where manufacturing personnel arerepresented by the United Auto Workers union, positioned itselffor a rebound. The union agreed to a two-tier pay system whichhas since allowed Ford to pay new hires a lower hourly wage,with reduced health benefits and less advantageous pensions.Ford is hiring again.

Peugeot has been hit by strikes. Public opinion, includingthe government, was immediately hostile to what will be thefirst closure of a large French car plant since 1992.Eventually, unions agreed a wage freeze for a company pledge toclose no more plants for three years. That deal helps existingworkers, but it leaves Peugeot saddled with unused capacity in ashrinking European market - the very problem the restructuringwas meant to address.

The French firm says it is using just 61 percent of itsdomestic manufacturing capacity, but Ford says its North Americaplants are running at 135 percent, because it has added shiftsto the standard working day. Some lines now operate around theclock, while others are working six days a week. In 2005, thecompany said it was using about 88 percent of its North Americancapacity.

Of course, there are many other differences between the twocompanies, and direct comparisons don't take into account suchimportant factors as the size of the market, costs and standardsof living, plus other benefits that are available.

But where Hand in Detroit aims to return to the autobusiness, Chnaiti is moving on. "I've turned the page," he says.

END OF THE LINE

Hand, 47, who had worked for Ford for 14 years when he tookhis buyout, said that when he and thousands of colleaguesreceived the offer, it was an easy choice. "Assembly line workis very, very boring," he said. "And you can't leave the line totake a break just when you want to. If you have to go to thebathroom, it doesn't matter. You have to wait until the nextbreak."

He was offered a range of severance packages, includingfull-time university or vocational school retraining of $15,000for tuition a year, for up to four years, and an annual stipendworth half pay. Some Ford workers went to Oxford and Harvard,but Hand took the most popular option: a cash payment.

Because he was not eligible to retire, he got $100,000 pluscontinuing health care for six months in return for a vow togive up post-retirement benefits other than the pension he hadaccrued. He was helped by the fact he has no dependants and hasbeen living rent-free in his parents' former home. He likes towork on house improvements.

In France, Chnaiti left Peugeot with 13 years under his beltand 40,000 euros - $54,000 - including overtime, holiday pay anda statutory legal payout. On top of that, he decided to re-trainas a bus driver, which Peugeot funded at an average cost of10,000 euros. His healthcare and pension allowance are coveredby France's existing state systems.

The two cases are, roughly, representative of the programmesat each firm. Ford says its average cost per worker was $100,000which does not include healthcare or pensions. Peugeot declinedto provide an average per worker, but a spokeswoman said totalrestructuring costs were due to reach 600 million euros by theend of 2013. That sum divided by the 11,200 workers who are dueto go is 53,571 euros, or about $72,000 each.

The Peugeot spokeswoman said the budgeted 600 million eurosincludes other costs linked to the shutdown. That impliesPeugeot's actual severance cost per worker is probably lower.

CONSENSUS

The most crucial difference lies not in the workers'experience, but in the companies'.

Ford's layoffs over two years affected nearly one in two ofits factory workers across the United States. Peugeot's overhaulis much smaller: Cuts it has announced so far show the companywants to reduce its French headcount by about 17 percent, orabout 2 percent of all those employed in the auto industry inFrance.

Even though Ford's cuts were much bigger, and painful forall involved, there were no strikes.

Marty Mulloy, vice president for labour relations at Ford,said it was helped by the fact the UAW understood its perilousfinancial situation in 2006: Without a sweeping reorganisation,unveiled that year under the name "Way Forward," the companywould have gone bankrupt.

The UAW talked with Ford throughout the restructuringprocess. "They were very cooperative in what we had to do at theend of the day," Mulloy said of the UAW.

The union did not respond to requests for comment.

Ford promised that no one would be forced out, though someworkers did have to move homes for work. It also used the talksto press the UAW into accepting plans for a new wage scale. Thishelped the firm hire new people for nearly half the rate theyhad been paying veteran line workers. "It takes about a year forthe company to recoup the expense of a buyout," Mulloy said.

FIGHT "TO THE END"

Like Ford, Peugeot pledged no worker would be forced out.But after its plans were announced, Chnaiti described theatmosphere at his Aulnay-sous-Bois plant as explosive. Theleaders of the CGT and FO unions vowed to fight "to the end" toforce Peugeot to keep the plant running. French IndustryMinister Arnaud Montebourg criticised Peugeot's plans inparliament, although he said later job cuts were inevitable.

After a series of protests gathering all unions, hard-lineleaders staged an occupation of a factory facility in early 2013that lasted five months.

At the heart of the dispute was the strikers' contentionthat Peugeot did not really need to close the factory. PhilippeJulien, a leader of the CGT union at the plant, argued that thecompany still had plenty of money to keep operating it. It wasmanagement and not workers who should pay for strategic errors,he said.

"If the Peugeot brothers (key shareholders) had been lessobsessed with spending on dividends, they would have made betterdecisions," Julien said. "As it stands, they are the ones whoshould lose their jobs, not the workers."

The Peugeot family declined to comment, but the company saidit had no choice: The firm was burning 200 million euros amonth. Peugeot sources at Aulnay argued that workers were merelyseeking to raise the stakes for when it came to negotiate theirseverance pay. Management and the strikers even filed criminalcharges against each other.

It was only when a long-serving Human Resources director,Philippe Dorge, was called in from another plant that thedeadlock was broken. For the 200 or so strikers, thecompensation was a one-time payment from Peugeot of 19,700euros, on top of normal severance pay, although strikersforfeited the right to vocational training. Peugeot declined tosay how much the dispute had cost.

"The strikes cost Peugeot money - but even then, it was morea question of image for the company," said Fabien Berruyer, headof a human resources consultancy specialising in the autosector. "For a Franco-French brand like Peugeot, the perceptionthat workers are being fired to please shareholders can actuallyhurt sales."

"WIN-WIN"

When Peugeot's strike ended in May, the company spent 10million euros turning Aulnay into a giant job placement centre,complete with motivational posters, classrooms and interviewswith potential recruiters.

"It's win-win," said Chnaiti, as he received hiscertification as a bus driver. "But I'm one of the lucky oneshere - a lot of other people didn't get the job they wanted."

In July this year, Peugeot took steps to ease the tension.As a condition of a state guarantee for a major loan, it plannedmore frequent talks with unions and opened up two board seatsfor union members on its supervisory board - a first forPeugeot, but a measure Renault has already used to seekconsensus.

The result was a deal announced in October: Unions accepteda one-year wage freeze in exchange for company promises to keepthree factories open in France.

Yet with sales continuing to fall in Peugeot's main Europeanmarkets, Peugeot's outgoing Chief Executive Philippe Varin isconsidering idling more production lines.

In Detroit, Hand's payout and savings are running low. Eightyears from now, he expects between $800 and $900 in monthlypension payouts from Ford. But he says he's not counting on thatmuch - pension plans like his, which give an idea what paymentsretirees can expect, are coming under increasing pressure acrossthe United States.

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