Peugeot job pact shows France's new labor detente

PARIS Thu Oct 24, 2013 12:15pm EDT

The Peugeot logo is seen at a dealership of French car maker PSA Peugeot-Citroen, Europe's No. 2 automaker by volume, in Selestat, eastern France, September 7, 2012. REUTERS/Vincent Kessler

The Peugeot logo is seen at a dealership of French car maker PSA Peugeot-Citroen, Europe's No. 2 automaker by volume, in Selestat, eastern France, September 7, 2012.

Credit: Reuters/Vincent Kessler

PARIS (Reuters) - Unions at France's PSA Peugeot Citroen (PEUP.PA) agreed on Thursday to freeze wages next year in return for a company pledge to keep plants open, the latest sign of easier labor relations in a nation famed for strikes.

A view spreading among workers that such collaborative deals are needed to save French jobs in an increasingly tough global economy is a factor behind the trend.

The car maker, struggling to reverse years of decline, said the deal would save it 100 million euros ($138 million) a year thanks to trade union concessions on wages, holidays and more flexible working hours at dozens of plants in France.

The accord caps marathon talks launched in June as Peugeot sought to boost productivity at its French plants without provoking strikes. It follows similar deals at industrial firms across France in a trend analysts say heralds fewer walkouts and more cooperative, German-style industrial relations.

"Bit by bit, we're inching closer to the German system," Antoine Solom, an expert on labor relations at pollster Ipsos, said of a German model of consensual union-employer ties cited as a factor behind the success of the euro zone's top economy.

"It will never be totally the same - the countries are too different," he said. "But on the ground there is a real change toward more consensus-driven unions and bosses too."

French unemployment is stuck at around 11 percent - compared to 7 percent in Germany - and economic growth is mired below 1 percent, frustrating Socialist President Francois Hollande, who was elected last year after pledging to foster job creation.

Societe Generale analyst Philippe Barrier said new labor accords were becoming unavoidable to prevent plant closures:

"What's changed is the economic context that makes it easier to obtain compromise, as unions have understood they are needed to maintain employment," Barrier said.

Data shows a sharp drop in strikes, with days of work lost showing a four-fold decline between 2005 and 2011.

COMPETITIVENESS PACTS

Peugeot is among many firms whose survival is in jeopardy after a decade which saw the elimination of more than 500,000 French manufacturing jobs. Its labor deal follows months of confrontation between unions and management at the Aulnay-sous-Bois plant near Paris, due to close for good on Friday.

The new agreement also commits blue-collar workers among a total of some 200,000 French PSA staff to more flexible shift arrangements and temporary transfers to other plants.

Though critics see a threat to hard-won improvements in working conditions, and note that pay freezes hurt consumer spending power, other firms have struck "competitiveness pacts" since new legislation came into force in May.

It obliges employers to negotiate before laying off staff but also lets them make deals with union representatives, ending an obligation to seek the consent of each employee individually.

Conflicts still erupt but the flexibility has helped deals at Renault (RENA.PA), the French unit of Germany's Robert Bosch (BOSH.NS), tyre maker Michelin (MICP.PA), plastics supplier Plastic Omnium (PLOF.PA) and drugs firm Sanofi (SASY.PA).

The new law also forces larger firms, with over 1,000 employees, to share more information with unions and give them representation on boards - a feature that echoes elements of the management-union relationships seen in German industry.

"Since this law came into came into force we've entered a new era," Arnaud Montebourg, France's Socialist industry minister, told Reuters. "This progress of social dialogue, toward compromise in companies, is for us a major positive point of the past few months."

"NO CHOICE"

Analysts say the trend toward flexibility is underpinned by a number of policy changes which have, for example, curbed the impact of strikes and made it easier to lay off employees.

Peugeot's rival Renault started to seek temporary wage and working-time deals as early as 2008. Warning that it might otherwise shift production to Spain, where pay is lower and terms tougher, Renault has since extracted permanent changes.

Automotive suppliers like Walor in northern France, with some 100 employees, have since struck similar deals.

Often, the concessions are small. In Michelin's case, workers are being asked to accept less flexibility to choose their own hours. But even small changes mean overcoming long-held attachments to workplace practices.

Labour Ministry for figures for 2011, the most recent available, show the number of days lost to strikes per 1,000 employees hit just 77, down from 318 six years earlier.

The change was stronger in the private than the public sector, likewise in services versus industry.

Trade unionists have mixed feelings about the deals but many acknowledge the alternative would be bigger job losses.

"The unions always have reservations about these competitiveness pacts," said Serge Maffi of the SIA-GSEA trade union at PSA. "But given what's at stake, we decided to sign."

(Additional reporting by Gilles Guillaume; Editing by Mark John and Alastair Macdonald)