Renault job cuts test France’s industry fetishism

January 16, 2013

By Pierre Briançon

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Renault was known in the old days, as France’s “social laboratory”. The carmaker’s powerful unions and state ownership guaranteed high pay, generous benefits, and short working weeks, occasionally interrupted by legendary strikes. Then globalisation, privatisation and a five-year slump in European car sales made the lab’s experiment unaffordable.

In the latest of a long line of restructuring decisions, Renault has announced that it plans to cut 7,500 jobs, or 14 percent of its French workforce, by 2016. It hopes to achieve this without compulsory redundancies, as long as the company’s still-powerful unions agree on a productivity boost.
 French pride will be hurt, as the announcement comes two months after a decision to create more than 1,000 jobs in neighbouring Spain – a sign that the reforms in the euro zone’s so-called “periphery” are beginning to work.

The French government has so far refrained from commenting on Renault’s latest decision. That silence comes as a welcome surprise in a country still fixated on the idea that industry expresses economic might. Renault’s competitor Peugeot, which is closing a plant in France, and steelmaker Arcelor-Mittal, briefly threatened with possible state takeover because it is shutting a money-losing mill, weren’t as lucky.

François Hollande, the French president, has recognised there’s a problem with French competitiveness and is trying to address it, albeit timidly. A recently signed agreement between unions and employers’ representatives opens the way for some labour market liberalisation. Yet the government has shown more interest in preserving the current industrial fabric – and less in fostering a welcoming climate where high-value services, for example, would thrive. France shouldn’t obsess about keeping the jobs of the past but try to create those of the future. Or its social labs will become museums.

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This opinion applies universally – the real problem comes to the fore when pandering politicians court union support by keeping the playing field unlevel and tilted towards the unions. Politicians pass legislation favorable to unions and block legislation unfavorable. Unions give money and votes. The real question is why do “the people” put up with it?

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