Can France’s ‘so-called workers’ still compete on the world stage?
By Bastien Inzaurralde, CS Monitor, March 1, 2013
Paris—After Maurice M. Taylor Jr. of tire manufacturer Titan International gave up on trying to buy a Goodyear factory in northern France, he wrote a letter to France’s industrial renewal minister that painted the French labor force in no uncertain terms.
“The French workforce gets paid high wages but works only three hours,” the Titan chairman and CEO wrote in the letter, which was printed in the French media last week. “They get one hour for breaks and lunch, talk for three and work for three.”
“You can keep the so-called workers,” he finished. “Titan has no interest in the Amien[s] North factory.”
Unsurprisingly, Mr. Taylor’s blunt words drew a heated response from Industrial Renewal Minister Arnaud Montebourg, who said they “denote a perfect ignorance of what our country is, France, of its strong assets, as well as of its globally-acclaimed attractiveness and bonds with the United States of America.”
But while the highly publicized, vitriolic exchange made for good fodder for press on both sides of the Atlantic, it also shined a light on the repeated criticism by businesses in France and abroad of the shrinking competitiveness of the French economy compared with its European neighbors.
Can the French economy still compete on the world stage?
Though France remains one of the most attractive European countries to foreign companies, the size and power of its industry has been dwindling for over a decade as plants have closed down and tens of thousands of jobs have been cut every year.
Nicolas Bouzou, the founder and director of economic analysis company Asterès, says lack of competitiveness is the French economy’s “No. 1 problem.” Such a problem won’t be fixed unless the government takes an entirely new approach to help businesses strive by cutting public spending and labor costs and making labor rules less strict, according to Mr. Bouzou.
The Goodyear factory in northern city of Amiens is the latest of countless cases of industrial failures that make the headlines virtually every week in France. An average of 65,000 industrial jobs were lost every year in France from 2000 to 2007, according to a September 2010 report by the General Directory of the Treasury, part of the French economy and finance ministry. Competition from foreign countries accounted for about a third of these job losses, the report found.
And as France’s industrial capacities diminish, so does its ability to attract companies from abroad.
According to a November 2012 report by consulting firm Ernst & Young, Germany edged out France as the second-most attractive European country for foreign investments in 2011. The United Kingdom was in first place. (A French government body, however, found France was ahead of Germany as a destination for foreign investments in 2011.)
Marc Lhermitte, a partner at Ernst & Young and the report’s author, says Germany is now increasingly attracting foreign businesses as a result of reforms enacted over the past decade that made its economy more competitive and open to investments while France’s attractiveness stagnated.
“In the meantime, France has become a cause of more and more interrogations and skepticism from foreign investors,” Mr. Lhermitte says, adding that France is nonetheless one of the European countries with the most foreign companies on its soil.
In a survey of foreign companies published with its report, Ernst & Young found 70 percent of foreign investors to France said the country remained an attractive destination but 53 percent had also been unhappy over the past decade about the level of taxes, the rigidity of the labor market, and high labor costs.
The French economy faces harsh competition from both Germany, which exports goods of higher quality than France, and from developing countries, as well as Eastern and Southern Europe countries where labor costs are cheaper, the report said. On the day he handed his report to Ayrault, Louis Gallois, the general commissioner to investment of the government and author of the report, said what France needed was a “competitiveness shock.”