New French Pres. Hollande says "Non!" to Peugeot's plan to close an excess plant.
French President Francois Hollande wasted no time ripping into PSA Peugot Citroen’s plans to close a major assembly plant north of Paris as part of a turnaround plan expected to be used in seeking a government bailout of the ailing automaker.
The new leader, who took the Socialist Party back into power, took a distinctly different position from industry analysts and press pundits. With rare exception, they had immediately hailed Peugot’s announcement last week as the long-awaited start of the restructuring of the European auto industry.
The Continent has seen a four-year slide in automotive sales and though there is near universal agreement that Europe has far too much production capacity manufacturers have, until now, been unwilling to make the first cuts.
Peugot’s sales dropped more than 10% during the first half of the years as sales tumbled not only in its home market of France but also key markets such as Spain and Italy, where the economies have been hit particularly hard by the European financial crisis.
However, Hollande, who handily beat Nicolas Sarkozy for the French Presidency in May, used a press conference on the most sacred of French holidays, Bastille Day, to air his view on the matter. “This shall not stand,” he told reporters. The law in France gives the government some fairly substantial weapons to delay plant closings and make them so costly management reconsiders.
As it is, Peugot’s management is under serious threat of clawbacks of any bonuses and the company itself could be forced to give 8,000 workers targeted by the proposed plant closure huge severance payments.
Hollande rode into office with a clear majority of votes by promising to stimulate the French economy and by extension the European economy. True to promises to offer more stimulus dollars, Hollande indicated he was willing to look at another round of incentives for consumers to purchase new, fuel-efficient cars.
Similar incentives in most European markets expired last year and have not been reinstated. But if the French government follows through other government ins Europe will undoubtedly follow suit rather than leave their own auto industries exposed.
Meanwhile, the drama around Peugeot leaves the management of General Motors in a delicate position. GM owns 7% of the French maker but since the Detroit-based company was bailed out by the U.S. government only three years ago, it is hardly in a position to object to any conditions laid down by the Socialists now running France.
It also makes it more difficult for GM and its new boss of European operations, Steve Girsky, to impose a tough, Wall Street-style restructuring on Opel/Vauxhall. Union leaders in Germany know perfectly well their French counterparts have the support of the French government in any impending showdown with management.
Government support in Germany might be less direct but it’s still in the background and German policy makers don’t like Anglo-American style capitalism any more than their counterparts in France.