Posted Jul 6th 2012 8:28AM
Peugeot's recent announcement about job cuts has caused a number of different reactions. When the French firm previously attempted to shed 6,000 jobs, company CEO Philippe Varin was called to Elysées Palace – the French White House – and then-president Nicolas Sarkozy suggested to him, in one of those ways that Varin couldn't refuse, that Peugeot reconsider, which it did. But there's a new president in the big house now, and Peugeot's position has gotten more dire, which has led the carmaker to reportedly raise its retrenchment level to 8,000-10,000.
Peugeot stock rose almost four percent on the announcement. But that only demonstrates the power of words, because actually getting rid of those 10,000 workers will be far more difficult. French workers are, of course, unhappy about the news and have been demonstrating outside company headquarters (as shown above). An outside analyst said the plan only makes the situation at Peugeot appear worse, and wonders how the firm can get rid of twice the number of jobs it couldn't shed when there was a more conservative government in power.
That conservative government gave both Peugeot-Citroën and Renault billions of euros in loans to weather the financial crisis, the bargain being that neither automaker would close French factories. The tribulations of both firms continue, and they haven't 'paid back' their debts; meanwhile, the government voted in with new president François Gérard Georges Nicolas Hollande is staunchly socialist, and there's almost no way the new president will quietly let 10,000 workers be added to the unemployment rolls after he campaigned on a platform of saving jobs.
As with the continually fluctuating headlines and fortunes of Greece, Spain and Italy, everyone knows the problems but no one seems to know where things will actually end up. The truths of economic possibilities, prudent fiscal policy, the profit motive and political maneuvering are swirling into an end-game that no one wants to face with their eyes open. During the holding game, Peugeot's factory overcapacity is closing in on 25 per cent, its sales are falling and its debts are climbing. The tieup with General Motors will help a bit, but there are pressing near-term issue, and as with the situation in Europe overall, this is a long way from being over.