Goodyear Held Hostage by French Union Demands

After French workers seized their bosses at a Goodyear Tire & Rubber (NASDAQ: GT  ) plant in Amiens on Monday in a bid to extort the highest possible severance pay out of the company for closing the factory, it brought to mind that perhaps Maurice "The Grizz" Taylor, CEO of tire manufacturer Titan International, knew what he was talking about when he excoriated French workers last year following attempts to get him to buy the plant.

As Taylor colorfully and memorably wrote to France's industry minister at the time, "How stupid do you think we are? The French workforce gets paid high wages but works only three hours. They get one hour for breaks and lunch, talk for three and work for three." He concluded by saying, "You can keep the so-called workers." 

Certainly not a standard-bearer for civility, Taylor nevertheless realized the difficulty in operating a business in France, where labor laws make the government a not-so-silent partner in all operations. A bill that wended its way through the French parliament last year would have actually granted union members amnesty for trashing corporate offices and threatening executives with bodily harm.

No wonder the Goodyear employees felt they could take their bosses hostage with impunity. Current law says boss-napping is punishable by a five-year prison sentence and a 75,000 euro ($102,000) fine so long as the executives are released unharmed in under a week, but workers are rarely prosecuted, the Associated Press says.

Executives from 3M, CaterpillarHewlett-Packard, and Sony have all been taken hostage by French workers over the past few years.

Last year the French union filed a lawsuit in Ohio to force Goodyear to keep the factory open, apparently since French courts have ruled that yes, businesses can really close factories. Now the workers say they've come to the realization there is no hope of keeping the Amiens plant open, and the union president said, "So we decided to change tactics and fight for the largest compensation possible."

The union previously refused Goodyear's efforts to restructure production at the Amiens plant because the tire maker said profit margins had narrowed and the European tire business wasn't sustainable. When it moved to cut workers, the union sued. Goodyear was left with little choice but to close the plant.

The union is demanding the 1,250 employees receive 80,000 euros ($108,000) plus 2,500 euros ($3,400) for each year worked, according to the AP. Goodyear has offered them 27,000 euros, but it had offered them 80,000 euros when the tire maker first discussed plant closings with the union several years ago, but the offer was rejected. Now they're back looking for a second bite at the apple. It's not yet clear whether their tactic was effective; as of Tuesday afternoon, the managers had been freed by police. 

When India's Apollo Tyre moved to acquire Cooper Tire & Rubber last year in a $2.5 billion deal, it was because slack demand in India and Europe made it desirous of entering the more robust U.S. market. Despite both sides agreeing to the merger, it went famously bust last month amid recriminations and promises of lawsuits to come, and it hasn't changed the underlying dynamics of the market.

The long, sorry history of labor relations in France attests that it's not a country you want to be doing business in. As the latest PMI figures out of the eurozone show, while virtually every other country is witnessing growth, France continues to wither, tumbling to a seven-month low. Even Greece hit a 52-month high and nearly reached the stabilization point to cross over into expansion territory.

The union is doing itself and the French economy no favors by resorting to such extreme negotiating tactics, and you might rightly question the sanity of an executive who chose to locate there.

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