-----Original Message----- From: [EMAIL PROTECTED] [mailto:[EMAIL PROTECTED]] Sent: Tuesday, August 28, 2001 7:23 PM To: [EMAIL PROTECTED] Subject: Foreign Firms' Layoffs Hit Home For U.S. Workers - WP The Washington Post 6 August 2000 Foreign Firms' Layoffs Hit Home For U.S. Workers Now, job cuts from abroad By Steven Pearlstein For most of the last decade, economists, politicians and business executives were crowing that the flexibility of American labor laws had helped restore the competitiveness of the U.S. economy and turned it into a veritable job-creation machine. But as the global economy slows and multinational corporations scramble to cut costs, Americans are discovering that the same flexibility that made the United States a preferred place to create jobs also makes it a cheap and easy place to cut them. Just ask the folks at Alcatel SA, the French telecommunications company, which recently spent $17 billion to buy its way into the North American market with a string of premium-priced acquisitions. When the telecom bubble burst earlier this year, Alcatel lost little time in closing some of its newly acquired U.S. plants, eliminating 5,000 of its U.S. positions, or slightly more than 1 in 4. Back home in Europe, however, it has been a different story. The company has been under political siege since June, when Alcatel's chairman announced his plan to close or sell half of Alcatel's 100 plants, including some in France. The French Industry Minister pronounced himself "stunned" by the news, French newspapers editorialized against it and the head of the company's union held out the possibility of a nationwide strike to protest the company's strategy of "catering to the financial world at any price." Responding to the uproar, Alcatel Chairman Serge Tchuruk issued a statement implying that no European sites would be closed. Despite a loss of $2.7 billion during the past quarter, Alcatel has managed to sell only one of its European plants and cut a modest 4,000 jobs from a European workforce of 70,000, or about 1 in 17 workers. Other European companies are also making disproportionate cuts in their operations across the Atlantic. Of the 3,000 cuts in permanent and contract employment announced so far by Nokia OY, the Finnish maker of cellular telephones, half have been in the United States, despite the fact that only 20 percent of its employees are here. And of the 10 chemical plants that German chemical company BASF AG said it would close, the only four that have been identified so far are in North America: two in the United States, one in Canada and another in Mexico. With foreign companies now accounting for about 6 percent of the U.S. workforce and an estimated 15 percent of manufacturing employees, the behavior of foreign multinationals is now of more than trivial concern to Americans. As it turns out, it is not just foreign firms that are looking to their U.S. payrolls for cost savings. Alcatel's U.S.-based rival, Lucent Technologies Inc., is well along toward its goal of eliminating 25,000 jobs worldwide. It is just now beginning legally required consultations with its European unions about cutting jobs there and dismissing even a modest number of workers is expected to be difficult. DuPont Co., which last year recorded half of its sales and employees outside the country, will make 70 percent of its job cuts in the United States. And at Delphi Automotive Systems, an auto parts maker, two-thirds of the 11,500 jobs cut during this year's restructuring have been in the United States, even though one-third of the company's employees are here. "Although CEO's claim to make global reductions even-handedly, in fact they move much more gingerly in those countries where there are tighter restrictions because they know they're going to end up with a biggest headache," said Jerry Jasinowski, president of the National Association of Manufacturers. "You get all this kickback in Europe. Here, in the U.S., there's a more acceptance to the idea of economic change." Determining the full extent of this U.S. tilt, or the reasons for it, is difficult. Many companies refuse to provide geographic breakdowns for their recently announced job cuts. And because of the political sensitivity surrounding layoffs, most are unwilling to make executives available to answer questions about the topic. According to the few executives in industry who would comment recently, however, the flexibility of U.S. labor laws is one factor in deciding where and when to cut. In Europe and Japan, laws, customs or union contracts impose strict conditions on when workers can be laid off and how part-time or contract workers can be used, and even sets the minimum number of vacation days employees can have. They also prohibit hiring of replacement workers during strikes. In France, layoffs are done not necessarily by seniority, but by which worker needs the job the most. In the United States, most of these issues are left up to companies and their employees. Discourse tends to refer to the rules in other nations pejoratively, as inflexible labor laws; in Europe, those rules are considered a positive, part of the social safety net. At Delphi Automotive, chief financial officer Alan S. Dawes said changing customer demand and relative efficiency are the main determinants of where jobs are cut at his firm. The cost and delays required to shut plants, however, are certainly a secondary factor, he said. In March, Dawes said, Delphi was required by local laws to pay more than one year's total pay and benefits to workers to close three European plants. In the United States, he said, the union contract usually puts the cost noticeably lower unless the plant has lots of younger workers. "The political environment or the social environment greatly impacts the economic decision," said David R. Whitwam, chairman of Whirpool Corp., which is in the process of cutting 6,000 positions from its global payroll. "To close a plant in Germany is very costly, but if the economies justify it, we would go ahead and make that decision despite the political or social impact," Whitman said in an interview published in the Financial Times. Even Alcatel's Tchuruk has acknowledged the extra frustrations in trying to makes cuts on his home turf. "When you have to take difficult social measures, you take them," he told Business Week in late May, after announcing another round of American layoffs. "But it is true that the rate at which you can do things is slower in Europe. Stefan Schnieder, chief European economist at Deutsche Bank, explained that there may be good reasons why a disproportionate share of the job cuts may be occurring in the United States. Because the economic downturn started earlier and has been deeper in the United States, it is only reasonable that the greatest impact so far would be on offices and factories that supply the U.S. market. Schneider also noted that much of the downturn has been concentrated in high-tech companies that have tended to cluster their production in North America and Britain, in part because of the more flexible labor environment. "I guess it's a fair assumption that if companies located facilities in places with flexible labor rules, they could be expected to take advantage of that flexibility when the economy becomes soft," Schneider said. That appears to be the case for Compaq Computer Co. Although Compaq is the leading supplier of personal computers in Europe, for example, it never established any major production sites on the continent, supplying the market from plants in the United States and Scotland, where rules about layoffs are also less stringent. Not surprisingly, a disproportionate two-thirds of the Compaq's 8,500 job cuts are expected to be in the United States, a spokesman said, with 700 planned for Scotland. Many critics of globalization have long warned that multinational corporations would try to take advantage of the differences in labor laws by threatening to move production to countries with the least restrictive labor laws. In the competition to attract new investment, they warned, countries would get trapped in a "race to the bottom," weakening worker protections everywhere. In a global economic downturn, with multinationals more focused on where to cut jobs than where to create them, the race seems now to be headed in the other direction. And nowhere is that more true than in Europe, where even the first announcements of "redundancies" have created a political backlash that threatens to reverse what few steps had been taken toward labor market flexibility. The German government, for example, recently enacted a law preventing companies from renewing arrangements with temporary "contract workers" who have been hired outside the traditional union framework. Such arrangements have been so popular with companies in recent years that they threatened to undermine traditional worker protections and create a two-tiered labor market. "If we look at the claims for flexibility, . . . each is connected with a demand that the government take away from large groups of working people parts of their security and ability to plan for their lives," Chancellor Gerhard Schroeder said. "This would contradict all German and European traditions. We do not want an American labor market." In France, meanwhile, the Socialist government has pushed a new law through the national assembly that would double minimum severance packages and prevent companies from laying off workers unless "all other means" have been tried to preserve jobs, including alternative plans submitted by workers' councils at each plant. If the company and councils cannot come to some agreement, a government-approved mediator would decide. The push for the new law began in the spring after a French firm, Danone, announced plans to shut six of its 36 European cookie factories, including two in France with 580 workers. And similar howls were raised weeks later after Marks & Spencer, the British retail chain, announced that it was closing all of its money-losing stores on the continent. "The logic of profit must not be exercised to the detriment of employment," French Prime Minister Lionel Jospin said in introducing the legislation. "Yes to a market economy, but not to a market society." In Washington, Hans Dieter Lucas, a spokesman for the German Embassy, said Americans who are unhappy that the ax has now fallen disproportionately on American workers should recall that the same "flexibility" helped create many of those jobs in the first place. "You can't have your cake and eat it too," Lucas said.
