Marks & Spencer could hardly have handled its exit from the French retail market more clumsily. On March 29th, just before the 8 a.m. opening of the London stock exchange, the British group announced that it was shutting down its 38 stores on the Continent, of which 18 are in France.
Three trade unions representing many of the 1,700 French people employed by M&S immediately filed a lawsuit. On April 9th the Paris high court suspended the shutdown of the 18 stores and awarded each of the unions 5,000 French francs (€762) in damages. The British company violated French law by failing to inform and consult its employees, Judge Catherine Taillandier ruled. Orders from London headquarters did not excuse the behaviour of the French management, she said.
On the same day, the French Ministry of Employment and Social Affairs delivered a scathing report on M&S to the prosecutor's office: "Social relations at Marks & Spencer in recent years have been marked by a certain number of difficulties that forced the labour inspectorate to intervene with company management to make them respect labour laws".
It is surprising that Mr Luc Vandevelde, M&S's 49-year-old chairman, should show such ignorance of French business culture. Mr Vandevelde left his job as deputy chairman of the French supermarket chain Carrefour to join M&S in January 2000. He had started his career in the accounts department of Kraft foods in Belgium and worked for Kraft in Spain, Switzerland, Germany, France and the US before going to the French Promodes group as chief operating officer in 1995.
Mr Vandevelde has insisted that M&S will go ahead with the shutdowns once it has placated the French justice system and trade unions. The decision was "the only one that made sense when we lost Ffr290 million on a turnover of Ffr1.7 billion, which is the case of the French subsidiary," he said.
The M&S experience highlights the absence of EU labour laws, and along with troubles at the Danone food group will strengthen France's reputation for being unfriendly to business. Article L.432.1 of the French labour code demands that employee organisations be given three days advance notice of a meeting to discuss lay-offs. For M&S to tell its French employees it was doing away with 1,700 jobs only 10 minutes before the news was made public was clearly insufficient. In theory, the offence could send Mr Vandevelde to prison for up to a year.
Officially, a French company cannot fire employees merely to increase profits, but it may do so to increase competitiveness - an absurd, hair-splitting distinction, say business lawyers.
Article L. 321.1 of the labour code says businesses which fire employees must present a plan reassigning them elsewhere when possible. If management fails to do so, it risks being sanctioned by a work inspector and having their plan rejected by a judge - as happened to M&S.
In addition to its disregard for the labour code, M&S timed its announcement badly. Eleven days earlier, France's ruling left-wing coalition lost nationwide municipal elections. The defeat came as a shock to Prime Minister Lionel Jospin, who believed that economic growth and a significant drop in unemployment during his four years in office ensured success. Suddenly, the French Left felt an urgent need to prove its social fibre.
The French food giant Danone made the same error, publicising its own plan to shut down two LU biscuit factories in Calais and RisOrangis near Paris, with the loss of 570 jobs, on the same day as the M&S announcement. Another 1,780 Danone jobs will be lost elsewhere in Europe. By coincidence, the French headquarters of Danone and M&S are located in the boulevard Haussmann in Paris, so their employees teamed up for a joint protest march on April 12th. Trade unionists are attempting to mobilise M&S employees in Germany, Belgium and Spain to attend a demonstration in London at the end of April or early in May.
Danone's turnover last year was Ffr94 billion, of which 24 per cent was in France, 35 per cent in the EU and 41 per cent worldwide. The group employs 110,000 worldwide. Faced with an unprecedented public and political backlash - and a nationwide boycott of Danone products - its chairman Franck Riboud was forced to explain himself last week.
In interviews with Le Figaro and Le Point, Mr Riboud expressed irritation that his company was confused with Marks & Spencer. "The Marks & Spencer plan was annulled by the justice system - not ours," he said. "We repect the letter of the law, and go beyond it." Indeed, he argued, Danone had promised not to transfer production from one country to another or subcontract.
"We have committed ourselves to offering at least three jobs to each employee who loses his job - one within the group in France and two outside his present region of employment." Danone intends to establish a follow-up committee to ensure these measures are carried out, and to "re-industrialise" the sites that are shut down. Over the past 20 years, Danone has closed 40 factories, Mr Riboud noted, but found new jobs for 95 per cent of its employees.
Mr Riboud called the boycott of Danone products, which has been endorsed by nearly 100 members of the National Assembly "an incitation to suicide". If the company's share price fell, he fears it would attract predators. "Do you really think Nestle, Unilever or PepsiCo will have a better social policy than Danone?" he asked. "Obviously the answer is no."
Not since the Michelin tyre company announced in 1999 that it was doing away with 7,500 jobs has a French company been the object of so much opprobrium. The Michelin incident shocked the public because, like Danone, it was making profits. It led to the adoption of the "Michelin amendment" which requires a company to renegotiate arrangements for the 35-hour working week before firing employees. Danone's experience has led to calls for a "Danone amendment", a tax suggested by the former interior minister Jean-Pierre Chevenement "to increase the cost of firing for profitable companies".
One of the few public figures to denounce the demonisation of Danone is Ernest-Antoine Seilliere, the president of the management association MEDEF. "The atmosphere is permeated with backwardness, with touches of fanaticism," Mr Seilliere said.
Mr Riboud argues that Danone is an innocent bystander in the hottest political and economic debate this spring. The group has been a leader in social policy, he claims, distributing FFr1 billion in employee bonuses for every FFr2 billion paid in dividends to shareholders. "Some people want to make Danone the symbol of a globalised economy that is ruled by the sole dictates of shareholders," he said. "We have become the scapegoats of a political battle. Enough! Let's stop beating up on a national champion."
The abuse heaped on Danone seems arbitrary when other French companies - including the Andre shoe shops, the computer maker Bull, the airline AOM-Air Liberte and the transport firm Grimaud are all firing large numbers of employees. Even the French car equipment manufacture Valeo is firing 3,000 people - but in New York state. Even the chief centre-right advocate of free market economics, the former finance minister Alain Madelin, has jumped on the antiDanone bandwagon. "When you are an important brand name, when you are LU, Danone . . . you may have to restructure but at the end of the day you must do it with zero firings . . . because you have a social responsibility which is part of the responsibility of business management," Mr Madelin said on French television.
Opinion polls show that 85 per cent of French people disapprove of the firings at Danone, and 70 per cent say they are ready to boycott the group's products, which include Evian, Badoit and Volvic mineral water, Bledina, Danette, Fjord, Gervais and Taillefine dairy products and a dozen brands of biscuits. Prime Minister Jospin showed his solidarity with LU workers by visiting a factory. Tomorrow night on French television he will announce new measures to discourage profit-making companies from firing.
