Wim Dries was at the public swimming pool with his kids last month when a loudspeaker announcement asked him to take an urgent call. On the line was the head of Ford Motor Co. (F:US)’s factory in Genk, Belgium, who said he was being held by workers opposed to a plan to close the plant.
“He was surrounded by a group of strikers and the tension was high,” said Dries, the city’s 40-year-old mayor. After Dries offered to send police to the factory, “things cooled down,” and the workers let the manager go, he said.
The labor trouble at Ford, which aims to shut two other European factories, shows the resistance automakers face in efforts to rein in losses in the region, which Fiat SpA (F) Chief Executive Officer Sergio Marchionne estimates totaled 5 billion euros ($6.5 billion) last year.
Auto executives, who are gathered today for the Geneva auto show, are struggling to push through five plant closings and 30,000 job cuts announced since last July aimed at restoring the profitability in the region.
PSA Peugeot Citroen (UG) is in a court fight with a union over plans to close a factory and cut 11,200 jobs. General Motors Co. (GM:US) faces union opposition at a German plant slated to be shut. Daimler AG (DAI) last month saw a worker revolt over cost cuts at Mercedes, which led to a shorter contract extension for the CEO.
Without reining in spending, losses will probably mount as the region’s auto market heads for a sixth straight annual drop. Capacity utilization in Europe will fall this year to 63 percent from 66 percent in 2012, consultancy LMC Automotive predicts, which would lead to greater losses due to the fixed costs of maintaining factories.
The proposed plant closings have prompted political uproar in the countries where shutdowns are planned, highlighting the gap between Europe, with its tradition of job guarantees, and the U.S., which swiftly restructured its automotive industry at the height of the great recession.
“These are very sensitive political subjects and it’s the sector where the unions are the best organized,” said Juergen Pieper, a Bankhaus Metzler analyst in Frankfurt.
GM lost $1.8 billion in Europe last year, bringing its cumulative losses there to $18 billion since 1999. Ford expects a deficit of $2 billion in the region in 2013, up from $1.75 billion last year. Peugeot, which in 2012 posted its first operating loss in three years, and Renault SA (RNO) are trying to eliminate almost 20 percent of their French jobs.
Peugeot is clashing with workers over plans to close its Aulnay plant in the northern suburbs of Paris. The CGT union has succeeded in temporarily blocking the proposal in court. Workers in France must be consulted and informed before jobs are cut and plants shuttered.
The factory in Aulnay, which makes the Citroen C3 city car, has been virtually idle since Jan. 16, when the CGT occupied part of the facility, demanding that the company increase severance pay to at least 130,000 euros per worker. Peugeot is offering some 60,000 euros to those with 20 years of service.
“There are about 300 strikers linked to the CGT,” said factory manager Laurent Vergely. “Out of these 300, there’s a group of about 50 troublemakers who don’t hesitate to cross the line.”
The strikers have thrown firecrackers, eggs, and bolts and spit at non-strikers and managers, Vergely said in the small room near the front gate where he has been working since he was detained for a few hours in October. Five employees are in the process of being fired as a result of such actions, he said. The CGT denies any wrongdoing and is fighting to get the workers back on the payroll.
“It’s taking more time than expected” to reach agreement on Aulnay, Peugeot Chief Executive Officer Philippe Varin said today in Geneva, adding that he sees the European market this year at the low end of a previous forecast of a 3 percent to 5 percent drop. “In this situation, you have to be very clear and deal with people in a responsible way.”
It’s the managers who have “declared the war,” welder Yousfi Ahmed said, surrounded by 50 strikers camped out on the blocked assembly line inside the factory. “They’re the ones who decided to destroy the industrial base.”
Facing Ahmed, yellow-jacketed executives from other Peugeot factories stood guard. Though they’re not making cars, Vergely says they’re needed to ensure the strikers don’t damage equipment. Workers say the managers, who get special incentives for manning the lines at Aulnay, are there to anger them.
“The violence is not on our side,” said Jean-Pierre Mercier, the CGT leader in Aulnay. “It’s on the side of the Peugeot management.”
Even if automakers succeed with the five shutdowns they’ve announced, their efforts may fall short of what’s needed. With sales and capacity utilization continuing to drop, carmakers probably need to close 10 factories to restore profitability, said Florent Couvreur, an analyst at CM-CIC Securities. Given Europe’s labor laws, he thinks that’s unlikely to happen.
The situation in the region stands in contrast to the U.S. after the Obama administration rescued GM and Chrysler LLC in 2008 with an $80 billion bailout. Ford didn’t receive any government funds.
The recovery there came after job cuts, plant closings and a United Auto Workers union agreement to halve wages for new workers and eliminate traditional pensions and retiree health care.
Today, the three largest American automakers operate 28 assembly plants in the U.S., versus 36 in 2007, according to the Center for Automotive Research in Ann Arbor, Michigan. Employment at all U.S. auto factories fell to 524,200 in July 2009 from a peak of 1.16 million in June 2000, according to the center. By the end of 2012, it had recovered to 662,300.
In Germany, union representatives get half the seats on companies’ supervisory boards. The Opel works council last week convinced GM to back down from a threat to close its Bochum factory at the end of next year.
The new agreement would keep the plant operating until the end of the 2016 and then transform part of the facility into a components and logistics center. The plan would secure 1,200 of the site’s 3,000-plus jobs, GM said. Rainer Einenkel, the plant’s works council chief, responded by vowing to continue fighting to keep production in the city.
Daimler CEO Dieter Zetsche had to settle last month for a three-year contract after worker representatives on the board refused to support a five-year extension, a person familiar with the matter said at the time.
Even when an automaker stops production at a plant, actually shutting it down can take years. Fiat, which closed its factory in Sicily at the end of 2011, has some 850 workers there on its payroll.
“We are still Fiat workers, we enter the factory every month to get our payslips from the company, our sons can attend vacation programs organized by the company,” said Roberto Mastrosimone, head of the Fiom Union at the plant. “If Marchionne wants to get rid of us, he has to send a pink slip to 850 people. We will fight to avoid this.”
In Genk, the confinement last month of the factory chief marked the second time this year that workers (F:US) held people against their will over the fate of the 48-year-old plant, which is set to close by 2014 and take 4,300 jobs with it.
“We are still negotiating with the unions as we speak on a social plan,” Wolfgang Schneider, Ford’s European vice president for governmental affairs, said in an interview in Geneva. “Our desire is to conclude the social plan negotiations now and to get the plant back to work because it has only worked sporadically since the announcement” that Ford intended to shut the factory.
Burnt cars stand outside the gates of the plant, and someone has painted “leugenaars” -- Flemish for “liars” --in black capital letters on the wall.
“I can understand the emotion,” said Mayor Dries, stressing that he opposes violence to resolve the conflict. “If the negotiations had to stop now, things could get worse. I’m following the situation every day.”
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