Thursday, July 12, 2012

PSA Closure, Montebourg, etc.

With the news that PSA will close its Aulnay plant, I refer you back to this earlier post of a little more than a year ago. You may recall that, at the time, the union claimed that PSA was going to close the Aulnay plant, but the company said that the documents obtained by the union were only contingency plans. Besson and Fillon called in PSA executives and received "assurances," Fillon said, that the plant would not be closed.

Undoubtedly, as I wrote at the time, the plans were well advanced, and the only "assurance" Fillon received was that the plant would not be closed before the presidential election of April-May 2012, which would have been a major embarrassment to Sarkozy, since the state had subsidized PSA during the crisis. Is it any wonder that "trust" among the French social partners is low, given this record?

On the other hand, is it any wonder that PSA is outsourcing its auto assembly, as I also wrote at the time? French unions, unlike German, Spanish, and Italian unions, have been unwilling to make changes in work rules and to adapt to the changing scale of auto production around the world. And the trade figures have reflected this. As I have also repeatedly emphasized, French auto imports have been increasing. This category is one of the most alarming trouble spots in French trade data.

So there is plenty of blame to go around here. The ball is now in Arnaud Montebourg's court. hew ill be on TV tonight, and on July 25 he will announce a "support plan" for the French auto industry. But realism is in order. The government cannot alter global realities in the auto market by fiat (no pun intended, even if Fiat has been more pro-active in this area than French firms). Nor can the unions expect the new government, merely because it is of the left, to respond to their understandable grievances by granting them all their wishes. Change is required, and change cannot be expected to be rational, or to succeed, if the parties distrust one another so deeply that essential information is concealed. This whole episode has been a sorry one in French industrial relations. Let us hope that Montebourg draws the correct lessons from the previous government's egregious mishandling of the situation.


bert said...

Let me get this straight, Art. If the workforce had had the right information, it would have accepted cuts to pay and conditions as the means to secure its longterm interests? It didn't have the right information, for which we can blame ... Sarkozy?

Perhaps the most entertaining part of this argument is the weird globoliberal inversion of the old line on false consciousness.

The ball is not in Montebourg's court. Not in the slightest. The question was whether a subsidy would be provided. The fiscal situation prevented it, with the result that the factory closed. Montebourg's sole function in this episode is to go on television and blow some warm wet wind in a leftward direction.

You suggest he might take the opportunity to spell out some home truths about competitiveness in a global economy, perhaps wrapped up in a broader package of coherent, compassionate industrial policy. Something honest that will please everyone. Dream on.

Anonymous said...

Anyone trying to save the European auto industry at this time of de-leveraging and economic bust (after a 30-year credit hyper-bubble)is frankly mad. The auto industry made its money in recent years from loans to consumers to buy new cars. The production of vehicles was merely a tool in the creation of further profitable consumer debt. Its all fallen over now and the cuts in Europe will be massive whatever a leftist French government might think.

bert said...

I don't mean to be intemperate, Art. It would be a shame if comments here degenerated into a troll-hole of frog bashing. I hope you can see that that's not where I'm coming from. And I see you were very clear that "there is plenty of blame to go around".

If Montebourg can demonstrate that he has anything other than a non-job, created primarily for party management purposes, then fine. He'll produce a serious package that we can kick around on that basis. At the moment though, I just don't see it.

Art Goldhammer said...

Bert, I don't think you're intemperate, and I accept the criticism that I am a "globoliberal." Indeed, I think globoliberalism is the correct position, even though the adjustment costs will be substantial. And I suspect that the French government will make the wrong decision on PSA and pour still more money down a rabbit hole rather than use the money to convert the Aulnay site to more viable uses. The European auto market is not the same as the US auto market, and PSA is not in the position that GM was in when the Obama administration made the correct decision to bail it out. I certainly did not mean to imply that I thought Montebourg could save PSA, but I fear that he, and the PS, will feel pressured to make amends for Jospin's correct but hard-hearted statement that "l'Etat ne peut pas tout."

George Ross said...

Art This has been a very long time coming and it is truly beside the point, to my mind, to class it as a current event and point the finger at particular actors, be they Sarko, trade unions, bosses, or consumers. I reemember a while back reading in an OECD report on France the strong conclusion that French manufacturers were much less adept at managing international supply chains than German ones. The PSA business is strong evidence of this and indicates to me that catching up, if it is possible now, will be hard and painful. To be sure, politicians get part of the blame, particularly Chirac and Sarko, for not finding ways to confront this kind of issue and encouraging key actors to deal with it. But they - whether Right or Left - have been prisoners of frequent elections, razor-thin margins, ferociously self-interested groups, not only unions, but bosses using the state and copinage to plug holes in their dikes while also relying on a patriotic home market. Well, this cocorico band of consumers has either gone up-market to German brands or bought cheaper Korean and Japanese cars, and is now less patriotic (or perhaps more discerning). This looks like a real exemplar of the decline of French manufacturing, and it is much too serious a problem to discuss by finger-pointing. Few of the conditions that created the problem have changed, nor do they look easily changeable. Here very serious and dispassionate debate is really needed. Why it is so hard to have such a debate is an interesting question in itself.

George Ross

Art Goldhammer said...

George, I agree, but I would point out that Renault has been much more successful in adapting despite being confronted with the same players and constraints you describe. Why?

George Ross said...

Art Good point about Renault to which I do not have a good answer, I fear. Renault discovered Eastern Europe as a good place to make entry level models even before the collapse of the Cold War, perhaps because its particular polytechniens and Énarques (back then Mitterrand appointees to a still largely nationalized company). This has paid off handsomely, it seems. One wonders whether this discovery was the product of good énarquing or Mitterrandiste realpolitik or perhaps both. The Peugeot crowd, from what little I know, was a pretty tight palace guard around the Peugeot family who played the domestic market and domestic politics in a more hexagonal way, a bit like the Agnelli-Fiat crowd did in Italy for so long. Their products were often good, and when this was the case, they exported directly from France. But we need a real expert on the car industry to sort this out. Some national champions have been smarter than others, it turns out, but the national champion model sometimes blocked out the realities of globalization, with the price to be paid by the folks in Aulnay and Rennes. Goodness knows they worked hard and well and made all kinds of concessions when the squeeze began quite some time ago. Lot of good it did them.

bernard said...

I don't mean to make a comment on PSA per se, rather a word of caution. I am simply quite sceptical from experience. Over 30 years ago, in the late seventies, I was a young graduate and the debate was raging: there was not a chance in a million, said mostly apolitical economists (ie. conservative), that French carmakers could survive more than a few years. Renault was destined to fail, Simca also, and Peugeot and Citroen. The reason: they could not adapt, could not be competitive etc. The exact same discourse as today. In the event, only Simca failed. In other words, the past 30 years must have sounded like "la nuit des morts vivants" to these carmakers, who have in fact acquired in the meantime various foreign carmakers including once thought impregnable Japanese carmakers. They have failed to penetrate in any measurable way the US car market though.

My personal moral for this story is let's be very prudent before uttering final judgment on the car industry including French. It does appear to be full of suprises historically speaking.

MCG said...

In France, as in the U.S., a huge
effort is made to save an industry
that depends on an almost-exhausted
resource, namely, oil. Among the
chief effects of this industry are
damage to the countryside and
traffic jams and pollution in the cities.

In France, moreover, the Socialist
government's efforts to save the
automobile industry run directly
counter to its efforts, for example, in Paris, to increase use
of public transit and bicycles and
to limit use of automobiles.

Is there really nothing else
besides cars that can be built at