Thursday, August 16, 2012

France, Meet Flint

France is struggling to help the troubled automaker Peugeot in an era of economic decline and austerity measures. It's not easy, but if Flint and Detroit are examples of what happens when auto jobs are allowed to disappear, I think it's worth the effort.

Steven Erlanger of The New York Times reports:
[French President Francois Hollande] even created a whole Ministry for Industrial Recovery, led by Arnaud Montebourg, to stop factories from closing. But now Europe is in recession, and Peugeot, hemorrhaging money, has announced plans to cut spending by $1.85 billion by 2015, lay off 8,000 workers and shut a major factory at Aulnay-sous-Bois, near Paris. And Mr. Hollande is learning how hard it is to be a French Socialist in a European Union that demands budget cuts and debt limits, endorses free trade and has rules against favoring national manufacturers. 
After the layoffs were announced, Mr. Hollande retorted that the plan “is not acceptable, and therefore it will not be accepted.” Mr. Montebourg, a foe of globalization and a fierce talker, accused the company of “lies” and “dissimulation,” and called the news “a shock for the nation.” 
Yet it is not clear what the government can actually do. PSA Peugeot Citro├źn is a private company facing global competition in a cutthroat business with its main market in a recession, and France is an expensive place to make anything, let alone the low-cost cars that make up a large part of its business. Part of the company’s problem, in fact, is that it has tried to keep jobs in France.

3 comments:

  1. Mr. Hollande recently proposed raising taxes on the "rich" in France to 75% of their income. There won't be anyone left in France to buy any cars.

    ReplyDelete
  2. As I recall, when a star dies, it begins to expand to get more hydrogen (taxes) to fuel it's "reactor". Eventually, all 100% of the available fuel (taxes) is consumed and the star dies.

    Higher taxes are NEVER an ultimate long term solution. You have to increase the SOURCE of fuel by increasing production of goods and services.

    Ship all the production overseas and outsource everything from telemarketing to engineering to radiology to another solar system? No fuel. Star dies.

    Of course there are those bankers and stockbrokers who think you can actually have a return on investments by moving things from one pocket to another under some new "paradigm". How's that working out for YOU? Most paradigms end up being worth about 20 cents.

    ReplyDelete
  3. Peugeot of course currently has a shared-development agreement with GM's Opel...another money-losing EU automaker that like Peugeot is legally prevented from closing plants, cutting pay or laying off workers.

    Fritz Henderson had found a buyer for Opel (i.e. Magna backed by Sberbank) in the months prior to the Obama takeover. The old Board was prepared to grit their teeth and take the relative pittance they were able to negotiate as a best offer for Opel in order to get out from under what Henderson and the financial team was projecting to be massive future losses. The UAW was livid...their mission isn't exactly compatible with a loss of jobs from a company they've organized, even if those jobs technically belong to other not-all-that-cooperative unions...and that particular issue was a key element of the argument to the Democratic Party and the Obama administration that GM should be taken over/"bailed out" so that Wagoner/Henderson and the Board could be given the boot. That of course is what happened, the sale of Opel was quashed, Henderson has been proven 100% right in yet another issue, and now we get to see who goes bankrupt first: Opel (possibly dragging down GM with it) or Peugeot.

    ReplyDelete

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