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France pressures Alcatel-Lucent on lay-off plans

By Nicholas Vinocur and Leila Abboud

PARIS (Reuters) - France warned on Wednesday it could use new rules to block a plan by telecoms company Alcatel-Lucent to lay off 900 French workers, but unions and government sources questioned whether the state would go that far.

The Franco-American group unveiled plans on Tuesday to slash a total of 10,000 jobs worldwide, arguing that the cuts were its last chance to stem years of losses and turn the company around.

The plans were criticized by President Francois Hollande's Socialist government, which is struggling to tackle high unemployment. Prime Minister Jean-Marc Ayrault said new labor rules could be invoked to stop the company forcing them through.

"If there is no majority agreement (with unions) the restructuring plan won't be accepted, because the law now gives the state the responsibility to act," Ayrault told Europe 1 radio.

"We want a negotiation that saves as many jobs as possible, as many sites as possible," he said, calling on Alcatel-Lucent to review a plan which at present foresees the closure of sites in Rennes and Toulouse and the possible sale of others.

France has a long history of intervention in the corporate sector. The case follows an abortive attempt by Hollande earlier this year to rescue activities earmarked for closure at ArcelorMittal's steelworks in northeastern France.

The French state owns a 3.6 percent stake in Alcatel-Lucent, making it the second-biggest shareholder behind investment fund Capital Research & Management. Alcatel-Lucent shares were down about 7.5 percent to 2.56 euros at 1523 GMT.

Alcatel was once one of France's biggest conglomerates with activities from trains to electronics, but it no longer earns major revenues there following its 2006 merger with Lucent. France accounted for a mere 5.7 percent of its 2012 revenues of 14.44 billion euros.

Likewise, the French component of the overall restructuring of its 72,000-head workforce is relatively minor. Even before Tuesday's announcement, its French workforce was 8,300 - less than half its total in 2006 after previous job-cutting.

Ayrault's call for talks will be the first big test of rules introduced in June giving trade unions more say in corporate decisions, a move intended to emulate Germany's cooperative labor model and avert the risk of strike action.

GRANDSTANDING?

Under those rules, firms must win backing of trade unions representing a majority of unionized staff and then submit the plans for government approval. Previously, they had only to consult a works council whose opinion was non-binding.

"Our goal is to weigh on the number of lay-offs," Herve Lassalle, a CFDT union delegate at Alcatel-Lucent, told Reuters. The CFDT aims in talks starting next month to rescue some sites from closure and oblige the company to fund job re-training.

If talks fail, the state will proceed to an in-depth check of the company's restructuring plans, assessing whether they are viable given the group's assets and economic health.

"There is a bit of grandstanding in Ayrault's comments," Stephane Dubled, a delegate of the CGT union which has minority representation at the group, told Reuters. "The state has some power in as much as it decides to use it ... but there hasn't been much experience of that so far."

One government source said its main aim was to apply pressure so that unions could come out of negotiations with the best possible result.

"The idea behind what every government official has said since yesterday is that this should be put to negotiation and hope that the final result is to limit or even avoid altogether any lay-offs," said the source, who requested anonymity.

Alcatel-Lucent, which battles in a fiercely price-competitive market with larger rivals Ericsson of Sweden, China's Huawei and Finland's Nokia, has posted five straight quarters of net losses.

France's left-leaning industry minister Arnaud Montebourg, who has led a "Made in France" campaign, said French telecom network providers should favor Alcatel-Lucent's products.

But there too, there are doubts over whether the operators would follow such a policy and what effect it could have.

At present Orange, which is 27 percent state owned, is its major French customer. But even if Vivendi's SFR, Bouygues Telecom and Iliad all switched overnight to buying Alcatel-Lucent gear, this would not be enough to solve its problems.

(Additional reporting by Ingrid Melander; Marine Pennetier, James Regan and Julien Ponthus; editing by Mark John, Anna Willard and David Stamp)

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