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Job losses split Europe

Thu., Sept. 23, 2004, midnight

PARIS — Stephane Zervos first suspected his job was threatened when his bosses removed most of the heavy equipment from the car wheel factory where he’d worked for 24 years.

Then in May, the ax fell. His German employer, Ronal GMBH, announced the closure of its plant in eastern France, while maintaining production in Poland and the Czech Republic.

Suddenly jobless in a country where unemployment is at 9.8 percent, Zervos and 166 fellow workers were catapulted to the front of a heated debate on the steady loss of jobs to Eastern Europe, Asia and Africa.

It’s a problem faced by many Western European nations — but the countries cannot agree on a solution.

The job drain has spurred a government drive to make France more competitive, fueling a split in the opposition Socialist Party and coloring French perceptions about new European Union members in the east, where labor is cheaper.

U.S. electrical components maker Vishay Intertechnology Inc. last month announced the closure of its plant in Colmar in eastern France, with 292 layoffs. Franco-Italian semiconductors giant STMicroElectronics cut 600 French jobs last year.

German car parts maker Robert Bosch AG used the threat of moving production to the Czech Republic to force its French workers to put in longer hours for no extra pay.

That followed a similar move by Siemens AG in Germany, where the Berlin Wall’s 1989 collapse prompted an eastward shift of companies seeking cheaper labor, with automakers and their suppliers leading the way. Volkswagen bought Czech car company Skoda in the early 1990s and makes its Toureg sport-utility vehicle in Slovakia.

Klaxon, a unit of Italian car parts maker Fiamm SPA, also said this month it will cut 183 of its 253 French jobs, moving production of car horns to India and radio antennas to the Czech Republic.

The catalogue of closures has left French ears ringing with what former U.S. presidential candidate Ross Perot once famously called the “giant sucking sound” of jobs leaving the country.

While Perot was talking about Mexico in 1993 — as then-President Clinton pushed the North American Free Trade Agreement — today’s French protectionists are worried mainly about Asia and the 10 new EU members that joined May 1.

Finance Minister Nicolas Sarkozy wants the EU to withhold economic aid from countries that use low company taxes to attract jobs.

The issue has split the Socialists, with party heavyweight and former Prime Minister Laurent Fabius saying France should reject the new EU constitution, in part because of French job losses. But his party leader, Francois Hollande, wants a ‘yes’ vote in next year’s referendum.

Economists say panic over job losses is not backed by evidence and that proposed remedies miss the point.

“Every case of offshoring makes the headlines because it creates a lot of anxiety, but it doesn’t really amount to much statistically,” said Lionel Fontagne, director of the Paris-based CEPII think-tank and joint author of a report on outsourcing being readied for Prime Minister Jean-Pierre Raffarin.

Less than 5 percent of French investment abroad goes to developing countries, according to Fontagne, and only a fraction of that investment involves the transfer of jobs out of France.

Of all French investment in eastern and central Europe, only 10 percent involves job outsourcing, compared to 20 percent of German investments in the same region.


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