French Industrial Policies Are Killing Peugeot

At Der Spiegel, "Peugeot on the Brink: How Paris Is Killing French Industry":

French carmaker Peugeot is fighting for its survival. But, by keeping its plants in-country and supporting wage hikes, the government is ignoring the rules of survival in the age of globalization. In the end, the workers it is trying to help might be the biggest losers.

Well-meaning people can often be particularly dangerous. Take French President François Hollande and Minister of Industrial Renewal Arnaud Montebourg, for example. They want to rush to the aid of French automaker PSA, which has driven itself into a crisis with its Peugeot and Citroën brands. Representatives of the CGT trade union, such as Jean-Pierre Mercier, also want to help. "We will fight for our jobs and the livelihoods of our families," says Mercier.

The French government and the unions want to prevent Peugeot from closing its plant in Aulnay-sous-Blois, outside Paris, and slashing 8,000 jobs. But if politicians and labor leaders are successful, they will only make things worse. Perhaps they'll manage to save a few thousand jobs in France in the short term. But, by doing so, they will put the company's future into even greater jeopardy. The company, which has been making cars since 1890, is fighting to survive. Sales have plummeted, and plants are not operating at anywhere close to capacity. PSA is currently losing €140 million ($173 million) a month.

For the 3,000 Peugeot workers in Aulnay-sous-Bois, their work ended temporarily at 10:30 p.m. on July 26. The plant was closed for five weeks, as it is every year for the summer vacation. But, this time, things were a little different. The commencement of the annual vacation period had a bitter aftertaste. Workers had just learned that the plant was to be permanently shut down in 2014.

President Hollande reacted immediately, saying that PSA's downsizing plans were "unacceptable" and had to be renegotiated. Minister Montebourg said that he had little faith in company management and speculated that perhaps the car company was merely playing the "imaginary invalid." He also said that he had a "real problem" with the company's strategy and the behavior of its main shareholder, the Peugeot family, which owns more than a quarter of its shares and received a substantial dividend last year.

Both CEO Philippe Varin and Supervisory Board Chairman Thierry Peugeot were called on the carpet, and the Peugeot family was forced to hear Montebourg deliver a lecture on patriotism. The company, the minister said, doesn't just belong to its shareholders, but also to "the history of France, a territory, a national idea."

The French state owns a share of Renault, the country's second-largest automaker, but not of Peugeot. Nevertheless, the government behaves as if Peugeot actually were a state-owned company. In this respect, it is demonstrating how matter-of-factly French politicians intervene in the management of major corporations.

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