By Wolf Richter, San Francisco based executive, entrepreneur, start up specialist, and author, with extensive international work experience. Cross posted from Testosterone Pit.
At 2 p.m on Thursday, the final day of the annually required wage negotiations that were going nowhere, Bruno Ferrec, the man in charge of the nine Fnac stores in Paris, and his HR Director were “retained” by 120 of his employees at a conference room at the Hotel Ibis in the rue des Plantes in Paris.
“Mr. Ferrec is in the middle of the room,” said Christian Lecanu, representative of the CGT, one of the unions involved in the negotiations. “He listens and keeps repeating, ‘the negotiations are over.’ For now, we do not know when we will let him go.” And the police did nothing.
Fnac is France’s largest retail chain in the cultural and entertainment sector (books, DVDs, video games, software, consumer electronics, tickets, etc.). It even has its own literary award for fiction. It operates stores in other European countries, Brazil, Morocco, and Taiwan. But times are tough: e-commerce competition, pirated products, falling flat-screen-TV prices…. Sales for 2011 were down 3.2%.
To reinvent itself, it is launching an expansion program. Certain stores would offer higher-end consumer products, such as designer vacuum cleaners and coffee makers. Decoration and life style, as it’s called in modern French, would be added soon. The idea: position the company above discount retailers. Good luck.
Somehow in parallel to, or despite, these expansion plans, PPR, the publicly traded company that owns Fnac, is trying to implement a belt-tightening program that would save Fnac €80 million. It would include 500 job cuts (310 in France) and “salary moderation,” that is, a wage freeze for the lucky ones.
Oh-là-là! Layoffs aren’t easy in France and become highly politicized. Wage freezes don’t sit well either, with gas prices shooting through the headliner. Read…. $10-Per-Gallon Gas Has Arrived In Paris.
“Isn’t it risky to announce job cuts 100 days before the presidential election?” the daily paper, le Figaro, asked Fnac CEO Alexandre Bompard during an interview.
The answer was a non-answer. “My responsibility is to ensure the survival of the Fnac,” he said. “Faced with a very poor economic situation, nothing would be more dangerous for the future than not implementing measures when they should be implemented.” And they would try to accomplish much of it through voluntary departures and internal reclassification.
Then there are legal issues. The Labor Inspectorate rejected the job preservation measures that the company had presented as part of the job-cuts plan and demanded more support for employees that would be transferred internally or externally. Today, two labor councils initiated court proceedings to suspend the layoffs, citing a lack of information on the economic and strategic underpinnings of the plan.
So, to apply additional leverage, 120 unionized employees have “retained” Bruno Ferrec, the hapless guy that has to implement the cost cutting measures imposed by PPR.
“We will hold the siege of the conference room for as long as management remains prostrate in silence,” said Philippe Graulière, from the Union Sud, the other union participating in the negotiations. What really galled him: “They imposed a wage freeze on us while PPR announced the distribution of dividends.”
Ferrec had made a counter offer, but employees weren’t enamored with his proposal and put the negotiations into overdrive. “The only thing they offered is a 15 euro increase for those that earn less than 1,500 euros,” lamented Sud member Catherine Gaigne.
Ferrec “accuses us of not working enough and putting the company into the red,” said Lecanu. He blamed top management for their disastrous strategy. “They all come from the world of supermarkets. They don’t know our business.”
“A difficult dialogue,” is what a Fnac spokesperson called it politely when le Figaro contacted the company, but wouldn’t comment otherwise.
Alas, at 9 p.m., police intervened politely, possibly at the request of the hotel which needed the conference room for other groups—this being central Paris after all. Ferrec and his HR Director were released. No arrests were made. Nothing was resolved.
In France, the labor negotiation tactic of locking up bosses is not unusual after a company threatens with layoffs or plant closings. Law enforcement rarely intervenes. What appears to be hostage taking and extortion in much of the world is viewed with a mix of amusement and support by the French media and the public, so long as it remains non-violent. Property damage, especially when plants are occupied, occurs on occasion. But only when it gets seriously out of hand does law enforcement try to calm things down. Labor groups have achieved some short-term compromises, but the long-term benefits remain dubious.
Certain other French companies, particularly the automakers, are also in deep trouble and want to restructure—more plant closings and layoffs. But when PSA Peugeot Citroën, whose sales are plunging, announced layoffs, it attracted the ire of President Nicolas Sarkozy himself. Layoffs will be even tougher to implement if socialist François Hollande wins the election. But something has to give. And even GM, whose European operations have been bleeding red ink for years, won’t save PSA. For that whole debacle, read…. The Nightmare of the European Auto Industry.