In return for the Socialist government’s dropping a threat to nationalize a steel making complex at Florange in northeast France, the company, ArcelorMittal, agreed to drop plans to lay off more than 600 workers at two blast furnaces there. ArcelorMittal, a Luxembourg-based company run by an Indian-born billionaire, also agreed to invest €180 million, or $234 million, in steel finishing operations at the same site over the next five years.
The deal does impose some unwanted expenses on the company, which is struggling financially in the weak global economy. But the bigger costs could prove to be the political ones the episode has created for the government of François Hollande, the French president, whose popularity was already on the wane.
Unions are angry that the government failed to follow through on its threat to nationalize the site in France’s former industrial heartland, and that the two blast furnaces under dispute will remain idled. Edouard Martin, head of the C.F.D.T. union at the site, accused the government of “having lied all along” about its intentions.
“Up until the last, we were led to believe a temporary nationalization was a given,” he said in a radio interview Saturday.
Meanwhile, French business leaders fear that the government’s threatened takeover of the plant, even if it did not come to pass, has sent a further chill through the global investment community following the Socialist government’s big tax increases for the rich.
“Investors don’t understand France anymore,” Laurence Parisot, head of France’s largest employers’ association, Medef, said in a radio interview.
“Planning to nationalize, starting a debate on it, is scandalous,” she said. “One should remember that nationalization is expropriation.”
The affair has left Arnaud Montebourg, Mr. Hollande’s minister for industrial renewal, politically isolated. It was Mr. Montebourg who first raised nationalization as an option, fanning the confrontation with ArcelorMittal. By the end of the weekend, critics of the left-leaning Mr. Montebourg were saying that his ministerial credibility was now so compromised that he should resign.
Mr. Montebourg rejected such talk in a television interview late Saturday and said that nationalization remained on the table as a “dissuasive weapon” if ArcelorMittal failed to stick to its commitments for the Florange site.
The Hollande government can rightly claim that it forced ArcelorMittal to back off from its plan to cut jobs at Florange while France’s unemployment was already over 10 percent and while other major employers, including PSA Peugeot Citroën, Air France and the drug maker Sanofi, were cutting French jobs by the thousands.
And yet the deal hammered out by the Élysée Palace and executives of ArcelorMittal does not appear to involve major concessions by the company.
In early October, it had announced plans to close the two blast furnaces at Florange, where it employs 2,700 workers over all. And the company still expects that those furnaces, which have been idled for 18 months for lack of demand, will remain shut down — although they will not be demolished in case they can be used in the future. The company also says that it will consider various solutions for the 630 or so affected workers, including other jobs within the company and early retirement offers.
And the €180 million it agreed to invest in other parts of the plant is money it might very well have spent anyway. The investment will be in processes that shape raw steel for uses like car panels and beverage containers. These downstream operations are valuable to the company because they serve industrial customers in France and elsewhere in Northern Europe. ArcelorMittal has good business reasons to maintain its big presence in France, where it has about 20,000 workers over all and where the French auto industry is a major user of its steel.
The company had already announced, in early October, a €7.2 million investment in an existing high-tech galvanizing steel line at Florange.
The fight with France, however, also highlights that ArcelorMittal, a behemoth with 260,000 employees worldwide and $94 billion in revenue last year, is nonetheless a struggling company.
Article source: http://www.nytimes.com/2012/12/03/business/global/hollande-victory-may-be-pyrrhic.html?partner=rss&emc=rss