TCS Daily

Vive la Relocation!

By Nidra Poller - October 11, 2005 12:00 AM

September in France is la rentrée, the restart of activity after the summer doldrums. But la rentrée 2005 took a tragic turn last month when Hewlett Packard announced plans to phase out 1,240 employees in its French operation...over a two-year period. France went on red alert. Every cliché of economic warfare was mobilized as distressed employees, outraged regional officials, ministers, the media, the prime minister and the president himself rushed to the front lines. To no avail. Those jobs and many others are disappearing even while Prime Minister Dominique de Villepin perorates and promises and polishes his presidential hopeful image. The HP imbroglio is a perfect illustration of the pitfalls of the French economic model. In a rigid micromanaged economy, jobs are hoarded in a locked cupboard à la père Goriot, while the dynamics of job creation are stifled and the French street erupts in anger.

The HP affair got the usual star treatment in the mass media. Angry engineers demonstrating outside the high-tech HP building in a Grenoble suburb stood in the spotlight of prime time news. Latest in a long line of heroes in tear-jerking "conflits sociaux" (labor disputes), they followed the craftsmen dumped this summer when the last scions of the luxury shoe industry closed shop, and echoed the raging peach growers and groaning dairy farmers. The sting was even sharper because HP plans to cut 26 percent of its French workforce and only 15 percent in the rest of Europe. Hewlett Packard was accused of the deadly sin of laying off workers while making huge profits. The workers responded with religious fervor and thinly veiled threats to sabotage HP's whole French operation.

The media were mobilized and marched, with rare exceptions, to the government's tune. Ritual castigations were proclaimed with clenched fists against a background of bright modern buildings surrounded by neat lawns. HP was accused of pocketing government subsidies and then tossing workers in the wastebasket of cruel capitalism. The dirty word "délocalisation" (relocation) was thrown in HP's face as if it were a native-born French company exploiting cheap labor in far flung lands. France is not a suburb of Palo it?

In the third week of September, while the media were hammering away at the "HP bites the hand that fed it" theme, Grenoble's deputy mayor Michel Destot flew off to Palo Alto with a delegation of union officials and politicians. It must have been pure cinema! The Frenchies stomping down long state-of-the-art corridors, storming into the vast offices of HP VPs, and giving them a piece of their French minds. Destot came home and announced that the "encounter was very useful..." He added that HP executives were surprised (you bet!) at the amplitude of the French reaction, and painfully aware of the risks of damage to their corporate image. Never mind that an HP spokesman declared that the "useful encounter" had yielded no promises on their part.

On the home front, local officials continued to claim, without fear of damaging their political image, that HP had received subsidies in exchange for job creation. The figure of €1.25 million was the lions...who chomped...and continued to masticate and drool over the millions allegedly paid out to Hewlett Packard long after the wild ravings were replaced with hard facts. The Isère Regional Council did invest €1.25 million for development of the industrial park where the company's offices are located. Over a ten-year period HP paid €700 million in corporate and other taxes, plus €93 million in "taxe professionnelle" (a tax based on payroll and equipment) for the two sites in the Isère region.

Villepin stepped front and center, keeping the "bites the hand" accusation afloat by puffing it up with generalities. Companies that receive public funds in exchange for promises of job creation should be held to their word, dixit Villepin. If they undo the jobs they created, they should reimburse the funds they received. In a mixture of matinee idol seduction and high-minded pedagogy the prime minister explained that "economic patriotism" is not backward but modern, if not postmodern. No one asked him how the doctrine of economic patriotism applies to an American corporation that creates jobs and pays taxes in France. By what rights could the multinational be prevented from also creating jobs in the Czech Republic, in India, or even in Côte d'Ivoire?

President Jacques Chirac went all the way up to the European Commission and tattled on Hewlett Packard. The Commission replied that it has no intention of stepping in to save 1,240 jobs in France, adding another bone of contention between Chirac and Commission President José Manuel Barroso, who have been sparring for months. When Villepin's arch rival Nicolas Sarkozy stepped into the fray, dismissing all this brouhaha as counterproductive, the prime minister went into a series of pirouettes, but kept crooning the same tune. Naturally la belle France would not impose stringent measures of a nature to discourage investment, innovation, creation of beneficial employment, abundance, elegance, and international stature. However, he reiterated, it should be clear that companies that receive subsidies in exchange for the creation of employment will be asked to reimburse in the event of layoffs.

But suddenly the Hewlett Packard story was shoved aside by a high intensity labor dispute combined with a smoldering political conflict in Corsica. The state-owned SNCM, which runs ferryboat service between France, North Africa, and Corsica is on the verge of bankruptcy. A French company named Butler has offered to buy it, but the workers won't hear of it. They blocked the port of Marseilles, cut off links between Corsica and the mainland, and camped on an impossible demand for a 51 percent government share in the company. Violent fringes of the Corsican independence movement went into intifada-type action, attacking police with rocks, Molotov cocktails, fire hoses. A rocket was fired at the Préfecture. Sailors hijacked a ferryboat, the cowed government released them after a pre-trial hearing, and now they are strutting around at the head of a take no prisoners revolt. The government has no leeway. EU rules prevent further subsidies, the SNCM is going to go bankrupt, and there's a good chance that all hell will break loose.

While Chirac is still murmuring that the European Commission is not listening to the people -- the people who of course are asking for HP to be denied the right to fire 1,240 employees -- his government certainly can't help hearing the firebombs bursting in Bastia.

Decidedly, if you have to quarrel, it's a lot nicer to do it in Palo Alto!


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