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The rise and fall of Peugeot is an image of itself. Out of gas

BY SOPHIE SASSARD, MARK JOHN AND GILLES GUILLAUME

A vintage Type 203 of French carmaker Peugeot at the Autofriedhof Franz Messerli auto graveyard near Bern, Switzerland, 2008. REUTERS/ ARND WIEGMANN

SPECIAL REPORT 1 PEUGEOT DECLINE OF A LION

RALLYING FORCE: Peugeot, which has owned Citroen since the 1970s, has a reputation for reliability and ruggedness. Left, Peugeot 208s at the plant in , near , 2013. Right, French world championship leader Sebastian Loeb in a Citroen Xsara at the of , 2004. REUTERS/GONZALO FUENTES/YANNIS BEHRAKIS

PARIS, DECEMBER 4, 2013 many ways mirror those of France, a former has fallen to just over 11 percent from a global power also fighting to define its role peak of 15 percent in 2002. he rush to Paris’s Charles-de-Gaulle in a world of harsher economic and politi- Earlier this year there were signs airport for flights to began on cal forces. The parallels between Peugeot’s America’s , which already TFriday, Oct. 11. A first set of bank- decline and France’s economic malaise are has a seven percent stake in PSA, might ers booked onto the 10-hour overnight startling. Today, both the automaker and be interested in a wider tie-up to help put Air China Flight; over the next 48 hours, the country are struggling to bring down the French firm back on its feet. Those talks they were followed by top management heavy debt and adapt to global markets. In cooled. Now China is key. from PSA Peugeot and the French PSA’s case, the company is at stake; France’s “It is the only card they have left to Finance Ministry. economy is a mounting worry for investors play,” said Patrick Fridenson, car historian Peugeot was ailing – and it had just in the euro zone. at France’s EHESS institute. started talks about selling a stake to state- Once known worldwide for the reli- PLUS CA CHANGE... owned Chinese automaker Dongfeng. ability and ruggedness of its , Peugeot “There’s a big exodus to China right – which has also owned the Citroën The group is no stranger to crisis – or to now,” a bemused trade unionist at the Paris- since the 1970s – has in recent years escaping it. based company told Reuters that weekend. watched rivals spot global opportunities In the , debts accrued after an ill- For the bankers, it would be just another and snatch them from under its nose. starred takeover of ’s European deal, but for the car-maker, it could be a Both France and PSA must find a way operations were about to send the company lifeline. Dongfeng and the French state are – if there is one – of competing in world to the wall when it produced the Peugeot contemplating a joint investment to prop markets while funding the labour and wel- 205 – a first-generation “.” The car up the 200-year-old firm, which is strug- fare provisions that make up the country’s sold millions and helped save the company. gling to contain losses that burnt 3 billion cherished social model. France’s share of “Every time there is a crisis, people say euros ($4 billion) of cash last year. euro zone exports has fallen by a third since it’s worse than last time,” said Jean-Louis PSA gave the world its first series-man- 2000 to just over 12 percent, while PSA’s Loubet, author of “The House of Peugeot”, ufactured car in 1891 – 22 years before Ford share of the Western European car market charting the history of the firm, which after took mass manufacture to a new level with its 1810 launch made everything from saws the Model “T”. It has survived two world Every time there is a to corsets. wars and become an emblem of France. crisis, people say it’s worse than The challenges facing PSA now are big- After years watching its position eroded by last time. ger than ever. Like many in France, the rivals and now hit by the financial crisis, it company must overcome entrenched resis- has reached a critical point. Jean-Louis Loubet tance to change. Its rich history and current difficulties in car historian The Peugeot family retain a minority

SPECIAL REPORT 2 PEUGEOT DECLINE OF A LION

shareholding which carries a veto on major The are … loyal European car market fell off a cliff. decisions, and have fiercely defended the patriots with the best intentions. “The strategy has not changed – indeed company’s independence. Their Protestant But they are horrified by change. it is more relevant than ever,” the spokes- ideals have made them social pioneers: man said. The crisis has “provided the im- Over the decades they provided low-cost Source close to the company petus to help us learn to work differently housing to workers and free healthcare in and more efficiently.” a specially built hospital. A pension scheme THE EMBODIMENT OF THE STATE for workers’ widows began as early as 1811. “The Peugeots are like that,” said one That weekend dash to China was not the source close to the company. “They are first mission to rescue the company. In the genuinely good guys, loyal patriots with 1940s, its founding family had to salvage the best intentions. But they are horrified what they could from the ruins of post- by change. And this culture spread to every war Germany. level of the company.” In 1946, the Peugeot factory in the town Current and former employees speak of in the Jura Mountains was in glowingly of an atmosphere of solidarity – ruins, largely destroyed by Nazi forces and a fierce pride and a desire to fight when the its machinery pillaged to help Hitler’s war company’s back is to the wall. But the same ON THE WAY OUT: Philippe Varin, Peugeot Chief effort. The Peugeots brought the equip- people complain that the best of intentions Executive, will be replaced by a former ment back. A train bearing the French flag have often come up against turf wars and executive. REUTERS/BENOIT TESSIER and 600 tonnes of machine tools returned. internal red tape. The cars turned out by the re-built Even a largely symbolic move an- Sochaux plant included legends such as the nounced last year – when the group sold its The management of Peugeot’s rivals sleek 203, which saw off and Jaguars prestigious head office a stone’s throw from has also become more international. Other to win the 1950 Liege-Rome-Liege rally – a Paris’s Arc de Triomphe – foundered on in- companies, including Renault, started foretaste of the great African rallies Peugeot decision. “It took years to convince them to adopting English and local market lan- would dominate in the 1950s and 1960s. execute a decision that was pure common guages. Renault is led by Carlos Ghosn, At the same time, France itself was on sense,” said one company insider. a French-Lebanese born in Brazil. And it the move. Its post-war leaders embarked on In Peugeot, the CEO is lodged be- has two Japanese officials sitting on a man- an era of reconstruction that was to trans- tween four Peugeot cousins with senior agement board that conducts its business form it into a modern economy with infra- roles: Thierry Peugeot heads the supervi- in English, as do an increasing number of structure and public services that would be sory board, Robert runs the family holding, French companies. the envy of the world. The French discov- Xavier is products chief for the Peugeot Just one non-Frenchman – UK-born ered a taste for leisure and motoring. In the brand and Frédéric Banzet, a cousin by director of communications Jonathan post-war recovery known as the “Glorious marriage, heads the Citroën brand. Neither Goodman – sits on PSA’s 13-man execu- Thirty” years, French car ownership rock- CEO Philippe Varin nor the Peugeot fam- tive committee, which still carries out its eted from 1.7 million vehicles in 1950 to 14 ily would be interviewed for this story. business in French. million in 1973. The company has maintained nearly A company spokesman said that French moviemakers, writers and de- half its global autos workforce in France when Varin joined in 2009, he said “we signers wooed the world. On the road, the – a bigger share than Renault employs are too European, too middle-range, too 1955 Citroën DS offered a completely new – which prompted Industry Minister small,” and then embarked on a strat- driving experience – hydraulic suspension Arnaud Montebourg this year to hail what egy to change that. But as ’s debt and directional headlights that adjusted he called its patriotism. Yet critics argue crisis poisoned the wider economy, the their beam to match the turn of the steer- its fierce sense of independence has meant ing wheel. It was one of the most instantly PSA missed opportunities for strategic recognisable symbols of France’s post-war Follow Reuters Special partnerships, such as a tie-up with up- Reports on Twitter: Fifth Republic. General Charles de Gaulle market German group BMW or Japan’s @SpecialReports chose it as the presidential car, and Citroën . Text continues on page 5

SPECIAL REPORT 3 PEUGEOT DECLINE OF A LION

Vital signs France's economic picture is among the weakest of the main rich nations.

High social expenditure and low average working hours... Public social expenditure as a pct. of GDP Average hours worked per week

France 30% 34 U.S. Japan 25 Germany 32

20 Japan 30 U.S. 15 28 France

10 26 Germany 2000 '10 2000 '10

...combine with a heavy debt burden... Government debt as a percentage of GDP 2007 2015 Japan

France 73 117% U.S.

Germany 0 250%

...as joblessness keeps rising but confidence falters. Unemployment rate Consumer confidence* France 10% 102 Germany 8 100 Japan U.S. France 6 98 U.S. Germany 4 96 Japan 2 94 2000 '10 2000 '10

*Long-term average = 100 Sources: OECD (consumer confidence, hours worked, public expenditure); Eurostat (unemployment); DataStream (debt to GDP)

SPECIAL REPORT 4 PEUGEOT DECLINE OF A LION

produced a special version for senior civil everyone from former Iranian President servants in the provinces. Mahmoud Ahmadinejad to New York cab- “A cortege of black DSs is the embodi- % bies and TV detective Columbo. In south- ment of the French state,” said Marc- 57 ern , the speedy 404 gave its name to Andre Biehler, director of the Citroën French public spending as a share dogmeat – a local favourite eaten in stews Conservatory in a hangar by the group’s of overall output – the highest of or grilled. Armies of battered, decades-old Aulnay site north of Paris. the G7 nations 504 estates still ply the taxi trade in many African countries. SEEDS OF DIFFICULTY Source: French government The cars show Peugeot’s vehicles stand But the post-war rise of the state was also the test of time, but they also highlight sowing seeds of later problems. France’s Peugeot plant in Sochaux was barely able to the limitations of its international strat- leaders dictated the reconstruction accord- match domestic demand, let alone chase for- egy. has the Latin American market, ing to centralized plans, and built one of eign markets. In Europe, France felt it had General Motors and are pres- the world’s most generous welfare systems. won back the pre-eminent political role that ent in China and the . Until Public spending as a share of overall out- befitted its pre-Occupation standing. recently, PSA’s biggest market after France put rose from just over 30 percent in 1950 But Europe was heading towards a was . to its current level of 57 percent – the high- common market – a project with goals Peugeot built a portfolio of often com- est of the G7 nations. It also rose in other that were increasingly liberal and designed peting models that was only streamlined developed countries – U.S. public spending to foster competition. The 1957 Treaty from the late 1990s. There followed a series doubled to its current level just short of 40 of Rome created a market between the of missed opportunities, strategic setbacks percent – but none as high as in France. six founding EU members: France, West and stop-start efforts to forge a greater in- The state still owns controlling stakes Germany, the Netherlands, Belgium, ternational presence. in some firms and significant holdings in and Luxembourg. In 1977, Peugeot passed over a chance others including France Telecom, airline “They (PSA) used to consider the to partner with American Motors Corp Air France-KLM and PSA rival Renault. French market as their private domain. But (AMC). AMC’s would have carried The hand of the state ultimately made after the Treaty of Rome that was no longer Peugeot into the four-wheel-drive mar- the country a world leader in high-speed possible,” said Fridenson. ket, one it entered later than others. It even trains and nuclear technology, but it served turned up its nose at the Espace design, MISSED OPPORTUNITIES France’s car makers less well. which later would become Renault’s world- Encouraged by state planners to focus In the 1960s, auto firms launched cross- beating people carrier. on mass production, Peugeot sacrificed its border deals and expanded globally to pen- A year later Peugeot bought Chrysler’s presence at the luxury end of the market. etrate the markets of foreign peers. For the European units to increase its presence In Germany, not only did the auto-makers most part, the Peugeot family kept aloof, in West Europe and act as a launchpad maintain their top-of-the-range models, agreeing in 1966 just to cooperate with for sales across the Atlantic. But the deal but the state built the autobahns on which Renault on engines. soured when it emerged that Chrysler’s their owners could let their powerful en- PSA models have been driven by European factories were in poor condition. gines rip. “The biggest lame duck in the entire history “The French state has to take its share of of the automobile,” Le Monde newspaper responsibility in that choice,” said car histo- called it at the time. rian Fridenson. In , Nigeria and Libya asked Citroën’s range was also looking lim- Peugeot as early as the mid-1970s to set ited. Aside from the DS, Citroën had the up local assembly plants. But it has been rudimentary soft-top 2CV – described way gradually supplanted by first Japanese and back in its original 1935 specification as now Korean . “four wheels under an umbrella” – but no PSA even made a pioneering move really compelling mid-range car. into China. In 1985, it and Volkswagen None of that seemed too serious at the won early access through deals with local time. France’s unbounded growth meant the car-makers. PSA took an approach that

SPECIAL REPORT 5 PEUGEOT DECLINE OF A LION

had worked in Africa, assembling the 504. Testing times Chinese buyers wanted something more Peugeot has not been helped by rising labour costs as its home market modern. Its factory closed in 1998. shrank. Ford has seen a rebound. “Is it what you’d call a global multina- tional? No, for a long time ... it did not con- MOTOR VEHICLE UNIT LABOUR COST INDEX cern itself with the tastes of its customers in Rebased to 2002 foreign countries,” said Fridenson. By last year, even the Iranian market col- Ford U.S. France restructuring lapsed under international sanctions over 150 150 its nuclear programme. When Peugeot suspended sales in 2012 it lost nearly 10 100 100 percent of global deliveries. That same year, France would get a new government run by Francois Hollande and see economic 50 50 growth slump to zero. LE CAPITALISME “MADE IN FRANCE” 0 0 '00 '10 '00 '10 In the 1980s and 1990s Britain and the United States began to cap state spending NEW CAR REGISTRATIONS and limit wage increases. Index, 2005=100 France chose a different course. The Socialists under Francois Mitterrand U.S. France picked policies aimed at stimulating con- 150 150 sumption, cutting work hours and increas- ing holidays. For PSA, that was a double 125 125 whammy: It added labour costs, and French consumers chose to flex their new purchas- ing muscle by buying white goods, Italian 100 100 shoes and ... German cars. In 2000, France capped the working 75 75 week at 35 hours and a subsequent de- '00 '10 '00 '10 cade of generous wage deals bolstered the costs to industry. The OECD calculates SHARE PRICE that by 2007, average salary and welfare Percentage change benefits available to manufacturing work- ers in France were higher than America, Ford Peugeot Germany or Britain. 50% 50% “With its production still largely based in France, the group is squeezed between 0 0 other mass market manufacturers pro- ducing at low cost in eastern Europe and –50 –50 premium German manufacturers (, BMW, ) attacking the mid- range,” said a 2012 report by industrial –100 –100 expert Emmanuel Sartorius that was com- '00 '10 '00 '10 missioned by the government. Hollande is trying to restore competi- Sources: DataStream (share price); OECD (Labour cost France); BLS (Labor cost U.S.); St. Louis Fed (registrations) tiveness to industry, be it textiles or white

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AN EMBLEM OF FRANCE: For many , Peugeot-Citroen is a patriotic brand. Clockwise, from left, President Jacques Chirac in a Citroen- , 1995; a in Bamako, Mali, in 2013; a Citroen 2CV at the centenary in 2013. REUTERS/CHRISTINE GRUNNET/JOE PENNEY/ERIC GAILLARD

goods. But the effort needed to compete CHINA OR BUST and play hard” and have a household in- at the top end of a given market is only In late September, a former Bond girl come just below 40,000 euros – high by possible for firms with healthy profit mar- stepped in. French actress Sophie Marceau Chinese standards. gins. French companies have the weakest landed in Shanghai to help sell the group’s Whether by selling cars or winning in Europe, according to tax data France luxury DS range to a new generation of finance, PSA’s fate is now intimately provides to EU statistics agency Eurostat wealthy young Chinese – a new bid to re- wrapped up with China, and whatever – around 29 percent compared with a euro vive Peugeot’s fortunes. happens with Dongfeng, that will mean zone average of 38 percent. Her role was to embody French el- change. Peugeot said in November CEO Peugeot has in recent years opened fac- egance: She smiled demurely in a red Varin will be replaced by former Renault tories in Slovakia and ; in February ballgown as she posed in front of a gleam- No.2, , who built a relation- 2012, a link-up with General Motors was ing white DS5, to the delight of Chinese ship with Dongfeng in a former role. billed as “a long-term and broad-scale glob- autograph-seekers. Arnaud Ribault, head But historian Loubet, who had exclusive al strategic alliance.” But by November that of the brand in China, called the campaign access to family files for his research, still year, ambitions for the tie-up were being “Innovative spirit from Paris.” believes Peugeot will not be rushed. scaled back amid concerns over Peugeot’s The DS project – which is not with “My analysis is that when you have got finances. The family turned to GM in mid- Dongfeng, but another Chinese partner – 200 years of history behind you, you don’t 2013 for help. In the weeks that followed it shows PSA has learned to differentiate its quite see time with the same eye as if you became clear GM’s CEO Dan Akerson, al- brands, the company says. The DS in China only had 50,” he said. ready preparing to hand over the company is aimed at the “modern independent busi- and head into retirement, was reluctant. ness elite”, average age 35, who “work hard Additional reporting by Laurence Frost in Paris

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A French warhorse in Africa

While Peugeot the company may be struggling to find its way, Peugeot the car is still going strong on some of the world’s most treacherous roads in the former French colonies of West Africa. The indefatigable 504 estate, based on the saloon produced by the French automaker from 1968, remains the mainstay of the cross-border bush taxi trade in the region. Millions depend on the vehicles to visit relatives or trade goods between countries such as Mauritania, Senegal, Mali, Burkina Faso and Guinea. Local cab-owners jack up the rear-end to provide greater ground clearance, then add a third bench at the back of the car to pack in even more passengers – typically a total of eight plus the driver. The bodywork is then festooned with stickers, favourite maxims (“Chaque jour est une vie” – “Each day is one life”) or professions of faith, including sometimes the name of the driver’s local religious leader or “marabout”. Luggage – and the occasional live goat – are stored on the roof rack. A 500-mile (800 km) trip currently runs at around 20 euros ($27) per passenger, or slightly more for those wanting a seat by the window or up-front with the driver. A lively trade in second-hand spare parts from France and an abundance of mechanics mean that even in West Africa’s smallest villages, it is possible to get a broken- FULLER FOCUS: Reuters photographer Joe Penney has shot Peugeot 504s in action in Mali. down 504 back on the road within the hour. For nearly four decades until the mid 2000s, the 504 was assembled in Nigeria. But in the past decade it has been shunned by Africa’s growing middle-class for whom Japan’s Land Cruiser became a status symbol. A Land Cruiser is well beyond the means of the average taxi-driver. “But I can tell you,” Insa Diaw, 56, a Senegalese cabbie who has been driving his 504 since 2002, told Reuters in the capital Dakar, “if you know how to drive a 504 properly, it can go places where a 4-wheel drive can’t.” Diadie Ba

View the photos in our gallery: http://link.reuters.com/nan25v

SPECIAL REPORT 8 PEUGEOT DECLINE OF A LION

In Detroit and Paris, a tale of two layoffs

By Nicholas Vinocur and Bernie Woodall

Five years after Jeffrey Hand took a $100,000 buyout to leave Ford Motors, the U.S. auto industry has surged back to profit and is once again hiring. Hand, who has spent the years living on his payout, has now applied to work at an auto parts supplier a few hours away from his old factory near Dearborn, Michigan. GOODBYE TO ALL THAT: Former auto worker Jeffrey Hand, left, took a buyout from Ford in 2008 Across the Atlantic, father-of-three which was more generous than that given by Peugeot to Hassan Chnaiti, seen here receiving his Hassan Chnaiti took a buyout from French certificate as a bus driver.REUTERS/JOSHUA LOTT/BENOIT TESSIER carmaker Peugeot earlier this year, as it prepared to close his plant near Paris. But having pocketed his severance pay, he will time laying people off than Peugeot. Ford percent of its domestic manufacturing soon start work as a public bus driver, thanks announced its major restructuring in 2006. capacity, but Ford says its North America to a job placement scheme funded by his Two years on, it had closed eight plants and plants are running at 135 percent, because it former employer. laid off nearly 40,000 workers. Over the 17 has added shifts to the standard working day. “Peugeot gave me a chance,” said Chnaiti, months since Peugeot began its restructuring Some lines now operate around the clock, a 34-year-old immigrant from Morocco with in July 2012, the French firm is set to close while others are working six days a week. In French nationality, who had worked his way just one plant and is struggling to reduce 2005, the company said it was using about up to the rank of supervisor. “But I don’t see headcount by just over 11,000, though it says 88 percent of its North American capacity. much of a future in this business for me.” more cuts may be necessary. That makes it Of course, there are many other Though separated by 6,000 km (3,700 harder for the firm to reinvent itself. differences between the two companies, and miles), Hand and Chnaiti have much in One key difference has been in the direct comparisons don’t take into account common. Both spent more than a decade companies’ dealings with trade unions. such important factors as the size of the building cars and were squeezed as their Ford, where manufacturing personnel are market, costs and standards of living, plus respective firms, saddled with high labour represented by the United Auto Workers other benefits that are available. costs in ever more competitive markets, union, positioned itself for a rebound. The But where Hand in Detroit aims to return fought to regain an edge. Both their union agreed to a two-tier pay system which to the auto business, Chnaiti is moving on. employers resisted a bailout from the state. has since allowed Ford to pay new hires “I’ve turned the page,” he says. And both men accepted buyouts to leave a a lower hourly wage, with reduced health company they referred to as their “family.” benefits and less advantageous pensions. END OF THE LINE But the differences between their stories Ford is hiring again. Hand, 47, who had worked for Ford for 14 – some of them unexpected – highlight Peugeot has been hit by strikes. Public years when he took his buyout, said that fundamental contrasts between running a opinion, including the government, was when he and thousands of colleagues business in the United States and France. immediately hostile to what will be the first received the offer, it was an easy choice. Hand, a talkative midwesterner, received closure of a large French car plant since “Assembly line work is very, very boring,” he almost double the lump sum that Chnaiti 1992. Eventually, unions agreed a wage said. “And you can’t leave the line to take a collected in Paris; indeed, the average freeze for a company pledge to close no break just when you want to. If you have to severance paid by Ford in 2008 for its more plants for three years. That deal helps go to the bathroom, it doesn’t matter. You departing staff was markedly higher than the existing workers, but it leaves Peugeot have to wait until the next break.” sum Peugeot has budgeted per worker this saddled with unused capacity in a shrinking He was offered a range of severance past year, a Reuters analysis has found. European market – the very problem the packages, including full-time university or Despite, or perhaps because of this, Ford restructuring was meant to address. vocational school retraining of $15,000 for in the United States had a much easier The French firm says it is using just 61 tuition a year, for up to four years, and an

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annual stipend worth half pay. Some Ford workers went to Oxford and Harvard, but Hand Downsizing in Paris and Detroit took the most popular option: a cash payment. A factory restructuring operation launched five years ago by Ford cost Because he was not eligible to retire, he more per worker, and cut much further, than one announced in 2012 by got $100,000 plus continuing health care French auto maker Peugeot. for six months in return for a vow to give up post-retirement benefits other than the THE RESTRUCTURE pension he had accrued. He was helped by FORD PEUGEOT the fact he has no dependants and has been Restructuring‹ duration 2006-2008 2012-present living rent-free in his parents’ former home. He likes to work on house improvements. In France, Chnaiti left Peugeot with 13 Plant closures launched 1 1 years under his belt and 40,000 euros – in restructuring 16 $54,000 – including overtime, holiday pay Original factory workforce/ and a statutory legal payout. On top of planned cuts 90,000 40,000 64,700 11,200 that, he decided to re-train as a bus driver, which Peugeot funded at an average cost of Estimated cost of $100,000 $72,000 10,000 euros. His healthcare and pension programme per employee 2 allowance are covered by France’s existing state systems. Sample severance Jeffrey Hand, 14 years Hassan Chnaiti, 13 years The two cases are, roughly, representative package of experience: $100,000 of experience: $54,000 of the programmes at each firm. Ford says its Added benefits in Cover for pension, Job training average cost per worker was $100,000 which restructuring package college healthcare, up worth $13,500 does not include healthcare or pensions. to half of hourly wages Peugeot declined to provide an average per worker, but a spokeswoman said total restructuring costs were due to reach 600 THE COMPANIES TODAY million euros by the end of 2013. That sum divided by the 11,200 workers who are due to FORD PEUGEOT go is 53,571 euros, or about $72,000 each. Market capitalisation $66.9 The Peugeot spokeswoman said the billion $5.1 billion budgeted 600 million euros includes other costs linked to the shutdown. That implies Annual output (vehicles) Peugeot’s actual severance cost per worker is 5.7 million 2.9 million probably lower. Capacity use (percent)3 135% 61% CONSENSUS The most crucial difference lies not in the Rough hourly pay $15.78 $16.00 4 workers’ experience, but in the companies’. for new workers appx Ford’s layoffs over two years affected 2012 full-year earnings nearly one in two of its factory workers across $5.7 billion $6.75 billion loss the United States. Peugeot’s overhaul is much smaller: Cuts it has announced so Notes: 1. Ford has continued to close or sell plants in North America. 2. Ford estimate. Peugeot far show the company wants to reduce its declined to provide an average. A spokeswoman said total restructuring costs were due to French headcount by about 17 percent, or reach 600 million euros by the end of 2013. Here, that is divided by the headcount cut and about 2 percent of all those employed in the converted into dollars. 3. Figures provided by the companies based on a two-shiƒ day. Ford’s auto industry in France. total shows shiƒs have been added. 4. Based on monthly pay of 1,700 euros. 1 euro = $1.35 Even though Ford’s cuts were much Sources: Ford Motor Co., PSA Peugeot Citroen, Reuters calculations

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bigger, and painful for all involved, there For a brand like Peugeot, into a giant job placement centre, complete were no strikes. the perception that workers are with motivational posters, classrooms and Marty Mulloy, vice president for labour being fired to please shareholders interviews with potential recruiters. relations at Ford, said it was helped by “It’s win-win,” said Chnaiti, as he received the fact the UAW understood its perilous can hurt sales. his certification as a bus driver. “But I’m one financial situation in 2006: Without a Fabien Berruyer of the lucky ones here – a lot of other people sweeping reorganisation, unveiled that HR consultant didn’t get the job they wanted.” year under the name “Way Forward,” the In July this year, Peugeot took steps company would have gone bankrupt. management and not workers who should to ease the tension. As a condition of The UAW talked with Ford throughout pay for strategic errors, he said. a state guarantee for a major loan, it the restructuring process. “They were very “If the Peugeot brothers (key planned more frequent talks with unions cooperative in what we had to do at the end shareholders) had been less obsessed with and opened up two board seats for union of the day,” Mulloy said of the UAW. spending on dividends, they would have members on its supervisory board – a first The union did not respond to requests for made better decisions,” Julien said. “As it for Peugeot, but a measure Renault has comment. stands, they are the ones who should lose already used to seek consensus. Ford promised that no one would be their jobs, not the workers.” The result was a deal announced in forced out, though some workers did have to The Peugeot family declined to comment, October: Unions accepted a one-year wage move homes for work. It also used the talks but the company said it had no choice: The freeze in exchange for company promises to to press the UAW into accepting plans for firm was burning 200 million euros a month. keep three factories open in France. a new wage scale. This helped the firm hire Peugeot sources at Aulnay argued that Yet with sales continuing to fall in new people for nearly half the rate they had workers were merely seeking to raise the Peugeot’s main European markets, Peugeot’s been paying veteran line workers. “It takes stakes for when it came to negotiate their outgoing Chief Executive Philippe Varin is about a year for the company to recoup the severance pay. Management and the strikers considering idling more production lines. expense of a buyout,” Mulloy said. even filed criminal charges against each other. In Detroit, Hand’s payout and savings It was only when a long-serving Human are running low. Eight years from now, he FIGHT “TO THE END” Resources director, Philippe Dorge, was expects between $800 and $900 in monthly Like Ford, Peugeot pledged no worker called in from another plant that the pension payouts from Ford. But he says he’s would be forced out. But after its plans were deadlock was broken. For the 200 or so not counting on that much – pension plans announced, Chnaiti described the atmosphere strikers, the compensation was a one-time like his, which give an idea what payments at his Aulnay-sous-Bois plant as explosive. payment from Peugeot of 19,700 euros, retirees can expect, are coming under The leaders of the CGT and FO unions vowed on top of normal severance pay, although increasing pressure across the United States. to fight “to the end” to force Peugeot to keep strikers forfeited the right to vocational the plant running. French Industry Minister training. Peugeot declined to say how much Additional reporting by Laurence Frost in Arnaud Montebourg criticised Peugeot’s the dispute had cost. Paris; Edited by Sara Ledwith and plans in parliament, although he said later job “The strikes cost Peugeot money – but Simon Robinson cuts were inevitable. even then, it was more a question of image After a series of protests gathering for the company,” said Fabien Berruyer, all unions, hard-line leaders staged an head of a human resources consultancy occupation of a factory facility in early 2013 specialising in the auto sector. “For a Franco- that lasted five months. French brand like Peugeot, the perception FOR MORE INFORMATION At the heart of the dispute was the that workers are being fired to please Mark John, Bureau Chief, France strikers’ contention that Peugeot did not shareholders can actually hurt sales.” [email protected] really need to close the factory. Philippe Sara Ledwith, Assistant Enterprise Editor Julien, a leader of the CGT union at the “WIN-WIN” [email protected] plant, argued that the company still had When Peugeot’s strike ended in May, the Michael Williams, Global Enterprise Editor plenty of money to keep operating it. It was company spent 10 million euros turning Aulnay [email protected]

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