By on March 14, 2013

Renault photo

In what Renault CEO Carlos Ghosn described as a “historic” event, the automaker has come to an agreement with the three unions representing its French workers that will keep five Renault factories in France running until at least 2016 while using attrition and retirements to reduce their workforce by 7,500 employees.

To keep all of the company’s French assembly plants open, the unions,  Force Ouvriere, CFE-CGC and CFDT, appear to have agreed to what amounts to a wage cut, at least to begin with. There is a salary freeze for the first year of the agreement, but workers will have to put in 6.5% more hours in their workweek and increase production by a third. It’s interesting that Ghosn got the French unions to agree to a longer workweek not long after the recent dust up between Titan tire CEO Maurice Taylor and French finance minister Arnaud Montebourg over how lazy or productive French workers are or aren’t.

Ghosn said that the contract is a “balanced agreement” and will allow Renault to “renew its competitiveness in France”. The agreement follows a pattern set earlier between Renault and Spanish unions, pressuring its French workers. Ghosn is using a different strategy to cope with the problem overcapacity in a stagnant European car market than other automakers. Ford, PSA and Opel have all announced planned factory closings. The Wall Street Journal reports that there are as many as 20 auto assembly facilities in western Europe that are running at less than 50% capacity. Ghosn’s plan is apparently to boost productivity and lower the company’s break-even point with its French operations. The company says that the increase in working hours will lower costs by an average of €300 ($390) a car. I guess Renault is dealing with the overcapacity situation by actually using more of that capacity. Before the global financial crisis, Renault assembled 1.2 million cars in France in 2007.  That figure dropped to 532,000 for 2012. The company says that planned production of 710,000 cars in France by 2016 will improve utilization to 85% of capacity.

Some of that increased production will involve building 80,000 Nissans a year for Renault’s strategic partner. Though Ghosn predicted that a “promising” line of new cars will change Renault’s fortunes on the continent, since he only recently said that the European market won’t experience any growth for years, I think that making cars for Nissan and Renaults for export is going to be what that increased production is for. Renault’s international sales have indeed been up and despite the doldrums in Europe, Renault did make $2.3 billion in profits for 2012. At home, though, things aren’t good. Overall car sales in France in 2012 were down 14% and in the European market in general, Renault has not been competitive. Last year Renault lost more than a percentage point of market share in Europe as its sales fell 19% in that region.

Ghosn may not have a choice about lowering per-car assembly costs. His competitors have been waging a price war as they lower prices in their own way of keeping assembly lines running and capacity utilization high.

Ronnie Schreiber edits Cars In Depth, a realistic perspective on cars & car culture and the original 3D car site. If you found this post worthwhile, you can dig deeper at Cars In Depth. If the 3D thing freaks you out, don’t worry, all the photo and video players in use at the site have mono options. Thanks for reading – RJS




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13 Comments on “Renault and French Unions Agree: No Plant Closures, 7,500 Jobs Cut...”

  • avatar

    Thanks, Ronnie. Great analysis. I for one hope French makers can find a way to go forward as the automotive landscape would be that much poorer without them.

  • avatar

    Are there any non-unionized car manufactoring plants in France?

    You have to wonder how much better they would be doing without the moneysucking unions

    • 0 avatar

      I don’t think I’m going to far out on a limb here when I affirm: Not possible in France. And in many other countries.

      • 0 avatar

        Haha, I agree, I didn’t think there were, just is something Many would hope to expect out of a supposably first world country

        France is quickly losing any sense of power(hah) that it had, without the euro keeping it afloat… Well don’t think what would happen then is a mystery.

    • 0 avatar

      I’m not sure about France, but Germany is a “right to work country” and workers are free to either join the union and pay dues, or not (I guess a high percentage or auto workers do). But since one can stand at an assembly line without being forced to join the union, there isn’t really a “union shop”. Again, not sure how it is legally in France. But forced union likely would violate some EU laws about freedom in employment etc.
      Would be interesting to hear a France expert on that.

      • 0 avatar

        Hey HerrKaLeun,

        Same as in Brazil, though joining the union or not does you no good as you have to give them one day’s pay a year. In manufacturing Jobs, even if you are a non union member, they represent you at collective barganing time. You have to sign a document when you join the company with the union, and if you’re fired or quit, the union is the one who homologates your dismissal. Don’t know about Germany or France, but I do know Brazil borrowed alot from Italian law for labor, France for civil law and Germany for Constitutional law. So, like you said, na expert would be good to hear, but there are points in common between Brazilian and European practices.

        • 0 avatar

          Interesting, I would have imagined Portugal would have been more a role model due to the language and its roots.

          Italy has labor law, like for the short period of time in between a strike and attending a rally? :) (I just love stereotypes, while watching my Knight Rider videos)

  • avatar

    I still only see ford as the only one doing anything.

    I can’t see how running plants at low capacity can even be possible.

  • avatar

    Good luck with that. The instant they can close all of those french plants they are done and not coming back.

  • avatar

    I don’t get the connection to the MT Choir. Please let me in on the joke.

    • 0 avatar

      You’re right, it’s an attempt at humor. I had gotten a bit lazy about putting tags on my posts and Derek asked me to be more conscientious so for the next post I tagged it comprehensively but added the MTC just to be silly.

  • avatar

    …and move the production to Morocco or Algeria with a price hike for the entire model range to keep the shareholders and banks happy.

  • avatar
    schmitt trigger

    ” It’s interesting that Ghosn got the French unions to agree to a longer workweek not long after the recent dust up between Titan tire CEO Maurice Taylor and French finance minister Arnaud Montebourg over how lazy or productive French workers are or aren’t.”

    Its called diplomacy. Understanding the opposing culture and then use negotiating skills.

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