Labor Relations - French Style
Or, Viva La Revolucion!
Story Originally Posted to the Wall Street Journal

PARIS -- Of the 22,000 workers Caterpillar Inc. plans to lay off this year, the French ones have perhaps the most radical tactic for negotiating their severance deals.

In an aggressive, and peculiarly French, negotiating strategy, they held their managers hostage. The workers detained the director of their plant and four other managers for about 24 hours this week. Workers released them only after the company agreed to resume talks with unions and a government mediator on how to improve compensation for workers who are being laid off.

Protest is "inscribed in the genes of French culture," said Maurice Lévy, chairman and CEO of advertising company Publicis Groupe. "In the past peasants protested against their lords. Today the difference is that the lords are chief executives."

Caterpillar declined repeated requests to comment.

The Caterpillar executive-hostage taking is the third in two weeks in France. The incidents, which were all peacefully resolved, revived fears that the economic downturn may fuel violent forms of protest in France by workers who feel they have nothing to lose.

German tire maker Continental AG, which is planning to close a factory in eastern France, this week moved the site of a meeting with unions to a hotel 500 miles away to avoid a repeat of tense protests last month when executives were pelted with eggs. Continental confirmed the move grew out of security concerns, but said it wanted to "stay in dialogue with employees."

The detention of the Caterpillar boss followed incidents at the French plants of Sony Corp. and 3M Co., where managers were held captive by workers angry at being laid off. In those cases, as with Caterpillar, unions and companies resumed talks on severance pay. Sony France's chief executive didn't return calls and emails, and 3M France declined to comment.

Jérôme Pélisse, a sociologist, surveyed 3,000 companies in 2004 and found that 18 of them had experienced an executive detention in the prior three years. "Kidnapping your boss is not legal," says Mr. Pélisse. "But it's a way workers have found to make their voices heard."

French Caterpillar executive Nicolas Polutnik, center,
with workers after his release Wednesday.

Taking the boss hostage is a way to stop the clock and reach out to those who made the decision to cut jobs -- especially when the decision comes from the remote headquarters of a foreign company, Mr. Pélisse said.

In the U.S. and most other countries, abducting a boss wouldn't be tolerated. In France, however, people have sympathy for those who take to the barricades -- as long as no one gets hurt. In the wake of the May 1968 cultural revolution, taking one's boss hostage became a popular form of protest.

One of the longest boss kidnappings in recent years took place at the Paris headquarters of bank Crédit Foncier de France in 1997. Even though he was detained for five days, Chairman Jérôme Meyssonier said there was "perfect respect" between him and employees.

With the recent public outcry over bonuses and stock options, executives are even more unpopular than usual in France. This week the government banned companies that get state funding from issuing stock options to top managers and limited some other forms of compensation.

"In the U.S., people accept getting fired on the spot, without complaining," says Michel Laboisseret, a CGT union delegate who took part in the Caterpillar protest. "We are more willing to pick a fight."

Even President Nicolas Sarkozy -- known for his pro-business views and policies -- said he supported the Caterpillar workers. "I will meet with the unions because they asked for my help, and I won't let them down," he said on the radio Wednesday.

Executive hostage-takings are deemed acceptable as long as some informal rules are obeyed. The workers must refrain from outright violence, and the executive must not be detained for more than a couple of days. Workers don't usually face criminal charges.

"Boss-napping falls into a particular category," says French police spokesman Laurent Bischoff. "Technically, it amounts to kidnapping, but it's not regarded as an offense." Police rarely intervene. "Our role is to stay within distance and let negotiations between unions and executives roll out quietly," Mr. Bischoff said. "Sending in troops would only help fan the flames."

Security firms and public-relations experts that help companies deal with these situations usually advise managers not to call the police. "That's the last thing they should do" said Yves Jambu-Merlin, who specializes in crisis communication at advertising firm Euro RSCG SA, because it could touch off violence or cause workers to trash the plant, he explains.

Mr. Jambu-Merlin advised one of the companies where the boss recently was taken hostage but declined to say which one.

Riot police did turn up in Paris on Tuesday when angry employees of luxury-goods company PPR SA besieged a taxi carrying CEO François-Henri Pinault. Police dispersed the workers, but Mr. Bischoff says that was "because they blocked traffic."

Caterpillar in January said it would shed 733 jobs out of 2,800 employees at its two factories in Grenoble in the French Alps. Legally, it must negotiate a "social plan" with the unions, which could include lump-sum payments, training or help finding new jobs.

After talks with unions, Caterpillar increased its package to €47 million ($62 million) from €37 million. But workers felt it still wasn't enough. On Monday they went on strike, and on Tuesday they began holding the executives. "We let them call their families," says Mr. Laboisseret, the union delegate. "We are not beasts."

Nicolas Polutnik, the plant director who was held hostage, didn't return calls seeking comment, but his wife confirmed she got a call from him while he was detained aimed at comforting her and his boys.

Albert Dupuy, the highest government official in Grenoble, said he spent Tuesday juggling phone calls from the Caterpillar union representatives and managers, including those at its European headquarters in Geneva. On Tuesday night, he persuaded the workers to release the human-resources director, who suffers from a heart condition. The other managers spent the night in the offices, sleeping on the floor, according to workers present.

Early Wednesday morning, Mr. Dupuy said both sides agreed to a 10-day schedule of negotiations on severance packages, and Caterpillar also agreed to pay the workers' wages for the three days they had been on strike. Midmorning, the workers let their bosses go.

French Bosses Besieged As Worker Anger Rises
As Originally Posted to The Wall Street Journal

PARIS -- French workers besieged bosses, including luxury and retail tycoon François-Henri Pinault, as anger at proposed layoffs generated more forceful protests.

Mr. Pinault, the son of François Pinault, is chief executive officer of PPR SA, which controls exclusive brands such as Gucci and Yves Saint Laurent. Employees surrounded his car as he left a meeting in Paris early Tuesday evening and refused to let him leave for nearly an hour. Eventually riot police dispersed the protesters.

Separately, workers facing layoffs at a Caterpillar Inc. factory in the French Alps detained four of their bosses Tuesday in a bid to secure better severance packages.

The incidents followed several others in France in recent weeks, and show how social unrest is mounting as the economic downturn deepens.

In France, companies can't lay off workers as easily as in the U.S. When a firm wants to cut workers, it must negotiate what is known as a "social plan" with local unions, often including a lump-sum payment, trainingand help in finding new jobs.

Trying to negotiate better severance packages, workers at a 3M Co. factory south of Paris held their boss captive last week, as did employees at Sony Corp.'s France unit earlier in March. Top managers at bank Société Générale SA awarded themselves stock-option packages two weeks ago, but then renounced them due to public anger.

And unions staged nationwide protests in January and March to demand concessions from high-earning business leaders and help for victims of the recession.

France isn't suffering more than other big economies. But the country's tradition of egalitarianism triggers strong reactions when people think they are being mistreated, or when better-off people appear to flaunt their wealth at a time of general hardship. Demonstrations have been peaceful, with the executives being held largely as a symbolic protest. There haven't been any flare-ups in the rough neighborhoods on the outskirts of major French cities, which exploded in riots in 2005 after an accidental police shooting of two young people.

Mr. Pinault, 46, has long been a symbol of France's monied elite. He attended one of France's top business schools and in 2005 inherited control of his father's fashion and retail empire.

The employees who surrounded him Tuesday work for two retailers in the PPR group: Fnac, which sells books and music, and Conforama, which sells furniture. Mr. Pinault announced a restructuring plan for these in February that could lead to 1,200 job losses in France. Protesters blocked a car Mr. Pinault was riding in as it was trying to leave the company's head office, said Boucherit Aziz, a Conforama union representative.

"Mr. Pinault squeezed all the cash he could from Conforama and now he wants to throw us away," said Mr. Aziz, who participated in the protest.

Through the window of his car, Mr. Pinault told workers that the company was doing its best to avoid abrupt layoffs, according to Mr. Aziz. Police didn't arrest any of the protesters, he said.

Mr. Pinault wasn't immediately available to comment.

The problems at Caterpillar followed a recently announced plan to lay off about 730 people from its factory near Grenoble, which employs about 2,700. The company had been negotiating with the unions for several weeks, but workers went on strike on Monday to protest what they saw as poor terms.

On Tuesday employees occupied the management offices and wouldn't allow four executives to leave, according to union representative Bernard Patrick. It wasn't clear when the executives would be allowed to leave.

Caterpillar said it hoped to resolve the matter quickly. "The actions that are taking place today, led by a small minority of individuals, are not helping as we work for a positive resolution of this situation," said Chris Schena, vice president for European and Asian manufacturing, in a statement. "The best way to resolve this matter is to continue the negotiations."

Caterpillar Sets Cuts at Illinois Plant

As posted by: Wall Street Journal

Caterpillar Inc. will cut more than 800 workers at a plant in Illinois that makes small engines for construction machinery and for trucks that haul freight and other goods, the company said.

The indefinite layoffs, slated to start in February, mark the first time the company has cut full-time workers on a large scale and for an indefinite period since early this decade. The news is the latest sign of strain at the Peoria, Ill., maker of engines and earth-moving machinery as mining companies, truck makers, housing builders and others slash spending globally.

"These decisions are never easy," said Gary Stroup, Caterpillar vice president with responsibility for the Large Power Systems divisions. The laid-off workers are members of the United Auto Workers union and work at a plant in Mossville, Ill. Caterpillars are too large for Lawn Care.

On Thursday, the company also said that sales of its machinery through dealers world-wide fell 6% in the three months that ended in November, compared with the year-earlier period, reflecting a sharp slowdown in growth in Latin America and Asia.

The job-cuts announcement comes at a time when the company has been laying off workers hired through employment agencies and idling workers temporarily at several plants around the world. It also follows an announcement by the company in June that it would soon move engine production from the Mossville plant to a new facility and shift other production into the nearly two million-square-foot facility. A company spokesman said Caterpillar hasn't decided what will be made in Mossville. The 814 job cuts represent more than half of Caterpillar's production work force in Mossville.

Also on Thursday, Texas Gov. Rick Perry said Caterpillar would build a manufacturing facility near San Antonio, creating more than 1,400 jobs. The facility will build midsize engines and house some paint and testing operations. Caterpillar will receive some subsidies from Texas for building the plant.

A Caterpillar spokesman said the timing of the announcements was a coincidence.

Costs Squeeze Caterpillar

Caterpillar Inc.'s third-quarter net income fell 6.4% as higher costs for steel, oil and other commodities offset sales gains.

Workers used Caterpillar machinery to excavate a trench for a new water line in this 2006 file photo in Sandy, Utah.

Although sales in developing countries remained strong, the company's outlook for the global economy in the short term turned increasingly gloomy.

The Peoria, Ill., maker of heavy equipment said net fell to $868 million, or $1.39 a share, for the quarter ended Sept. 30, from $927 million, or $1.40 a share, a year-ago. Revenue climbed 13% to $12.98 billion aided by higher prices and a weaker dollar.

On average, analysts polled by Thomson Reuters were expecting a profit of $1.41 a share on $12.43 billion in revenue. Its shares declined about 5%, or $2.07, to $38.83 in 4 p.m. trading on the New York Stock Exchange.

Caterpillar said it expects global economic growth to drop a percentage point in 2008 to 2.8% from 2007, then fall farther in 2009 to less than 2.5%. Meanwhile, the U.S. and Canada will grow less than 1% in 2009, the company projected.

"Next year, no doubt, will be a challenge," Caterpillar Chief Executive Officer Jim Owens told investors in a conference call Tuesday.

As the downturn in the U.S. housing market and wider economy has rippled around the world, Caterpillar has increasingly relied on sales in developing countries such as China, Brazil and Russia to boost sales and earnings.

With heavy-machinery sales declining in Europe and North America and gains expected to temper in developing economies, Caterpillar's profit prospects look more uncertain than they have in years. In an unusual step, the company delayed forecasting its 2009 profit until January citing "economic turmoil" that forced a change in its timetable.

Caterpillar did estimate that next year's sales of its earth-moving machines and engines that power ships, tractors, electricity generators and oil-drill rigs will be about even with 2008, at about $50 billion.

In recent years, growth outside the U.S. has helped Caterpillar offset weakening demand in developed countries. In Europe, Africa and the Middle East, sales of engines used to make electricity jumped 20% in the third quarter, with demand in Africa and the Middle East offsetting drops in Europe.


Sales of engines that help generate power in petroleum-production operations rose 44% in Latin America. Strong demand for gas generators for data and telecommunications centers in China helped drive a 32% boost in engine sales in the Asian-Pacific region.

But in the developing world, "problems are emerging," Caterpillar CEO Mr. Owens said. Some major infrastructure projects probably will be delayed amid financing troubles, he said.

Mr. Owens said that as long as oil prices stay above $50 a barrel, he still expects investment in petroleum production to continue, requiring more of Caterpillar's giant engines, pipe-laying machines and other equipment. If prices for many metals remain above levels they hit in early 2005, mining companies would still spend to replace equipment, he said. The company has about three years' worth of orders for mining trucks that can handle payloads of 100 tons or greater, he said.

In late 2009 or 2010, Mr. Owens said he expects economic growth in the U.S. to begin rising again. Meanwhile, the need for infrastructure development in emerging economies will grow.