Titan, France and the Devil v. Daniel Webster

February 23rd, 2013
in Op Ed, syndication

Written by

The exchange of abuse and insults between Maurice (the Grizz) Taylor, president of Titan International, the American owner of Goodyear, France, and France's minister for industrial "redressement", Arnaud Montebourg, is good knock-about stuff, but does not contribute much to the understanding of the issues at stake.

The way in which the media on both sides to the Atlantic has taken up the issue has not made things any better. Let's just say that virtually all the participants in this show are making the error of arguing from the particular to the general, which qualifies for them for a fail in elementary logic.

Follow up:

To start with Maurice the Grizz, he talks as if every factory in France, and therefore French industry and France in general, is suffering from the same calamitous conditions as those at the Goodyear tire plant in Amiens, where, alleges the Grizz, the workers only work three hours a day and spend the rest of the time at lunch or in discussions about the iniquity of Goodyear's plan for closing the plant with the loss of about 1,700 jobs.

Put this way, his argument is ridiculous. France may have its problems, but it is a prosperous and highly productive country. Media comment in the USA has followed suit, not so much denouncing what is happening at the plant concerned, but the way things in general are supposed to be done in France.

Montebourg, in a reply to the Grizz - which was more elegant but just as insulting - points out how successful France is in attracting foreign direct investment, thereby demonstrating that the Grizz doesn't know what he is talking about. But this also misses the point.

The media in France have been prompt to challenge Titan's general arguments, such as that wages in France are too high (wage costs are above the EU average, but not the highest) or that France has a bad productivity record (productivity in manufacturing is impressive, better than in the USA itself). They also misses the point, which is that wage costs at the Goodyear factory are far too high and productivity abysmal.

For the point is, or ought to be, that this is not a dispute about the French economy versus the US economy, but a dispute about the problems that a multinational company operating in France has in trying to restructure in the face of changing market conditions and, finally, in the absence of any likelihood that the plant will become profitable, to close it down.

The management at Goodyear has come face to face with the militant trade unionists of the CGT, the communist dominated trade union, and the union's exceptional skills in fighting and delaying almost indefinitely the management's proposals.

Should the president and CEO back at group headquarters in the USA get the feeling that the trade union lawyers make Daniel Webster (see Webster v The Devil) look like an amateur, one can only sympathise.

But if instead of generalising about France, the Grizz had pointed out that the problem Goodyear has with the plant at Amiens has close parallels with the problems that many other multinationals (and some domestic companies as well) have had when trying to restructure or close down a plant, he would have made a sound point.

Just as he had a good point when he says that you can't operate a factory if the labour force only works three hours a day and spends the other four at lunch or in discussing ways to fight and obstruct the management's plans.

But the situation at the plant in Amiens appears have arisen not because the labour force wishes it to be that way but because Goodyear has cut tire output drastically, so that production is only enough to keep the labour force at work for three hours a day.

On the other side of the Atlantic, there seems to be an obvious solution to this problem : dismiss two thirds of the labour force. But that is not how things work in France, where there is well-worn procedural path for negotiation between the management and the labour force, which is often long, exhausting and extremely expensive, before collective dismissals can be made.

Labour law and the practice of the law by the relevant courts and public authorities, and more generally the attitude of politicians, whether of left or right, indulge the unions' inclinations to argue the point until there is nothing left to chew on. And this can take years.

More generally, there is no sympathy in France for "creative destruction". The approach of the present government is that the primary purpose of a company is employment and profits should be a secondary consideration.

Indeed, the idea that a company can be justified in reducing the labour force if it made a profit in the preceding year is frowned upon by the courts that deal with collective dismissal cases.

The former employees of a US subsidiary company that closed its doors a couple of years ago when it was in just this situation recently won a court ruling allowing them to take a case to an appeal court to argue that the severance pay that the subsidiary in France failed to pay should be paid by the parent company in the USA. The case will be watched carefully by international business lawyers.

Mr Montebourg and his ministry seem to devote most of their energies to trying to stop any company that plans to reduce the labour force from doing so. He is said to have a entire section at the ministry devoted to contacting officialdom in the locality of any company that is about to reduce the labour force, telling them to get out there and try to stop it.

There are countries in Europe, notably the Nordics, that accept that there is no point in keeping companies afloat that have little prospect of ever being viable, thus releasing labour and capital for employment in industries with a higher value added, able to pay better wages and to make a contribution to national prosperity.

France, however, is quite definitely not one of them.

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