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AnonymousInactiveHP’s French Twist
Why its plan to lay off 1,200 in France has reverberated all the way up to President Chirac’s office.
Shock waves have been
emanating from Grenoble ever since mid-September, when U.S. tech giant
Hewlett-Packard Co. (HPQ ) announced it would eliminate more than 1,200
jobs in France. A big chunk of the cuts is likely to come from this
pleasant city of 425,000 in the French Alps, where HP employs 2,400
people, about half its French work force. Angry HP workers poured into
the streets when they learned of the plan, and Grenoble’s mayor on
Sept. 20 led a delegation to HP’s Palo Alto headquarters, where he
received a polite but noncommittal reception.The protests didn’t stop there. HP’s European brass were summoned to
Paris on Sept. 26 for a meeting with France’s Labor Minister. Prime
Minister Dominique de Villepin suggested that companies might be
required to sign a “code of conduct” limiting their ability to lay off
workers if, as in HP’s case, the government financed road works and
other improvements benefiting their factories. President Jacques Chirac
even asked the European Commission to intervene, although his request
was quickly rebuffed. HP, for its part, appears undeterred. “We all
know how politicians are. For better or for worse, this has provided
them a platform to get some air time. But we don’t feel it’s going to
impact our ability to do what we’ve announced,” Todd Bradley, executive
vice-president of HP’s Personal Systems Group, told an investors’
conference in San Francisco on Sept. 22.Grenoble seems an unlikely site for such an uproar. For more than a
decade it has billed itself as France’s answer to Silicon Valley — and
with good reason. It is a world-class research center, with scores of
public and private labs studying everything from advanced materials to
microelectronics. In valleys leading out of the city, cow pastures have
given way to office parks and gleaming factories run by multinationals
such as Royal Philips Electronics (PHG ) and STMicroelectronics (STM ),
as well as successful local companies such as Sofileta, a manufacturer
of high-tech industrial textiles, and IT company Groupe Silicomp. At
8.7%, Grenoble’s unemployment rate is well below the national average
of 10.1%. The tech workforce of 25,500 is set to grow over the next few
years as Grenoble and the surrounding Isère region get a major infusion
of aid from Paris to encourage nanotechnology research and development.
“Can the local economy absorb the shock from HP? Yes,” says Jean-Paul
Giraud, president of the Agency for Studies and Promotion of Isère.So why all the protests? Politics, for one thing. Chirac and his
government have made fighting unemployment their top domestic priority.
News of the HP layoffs plays into national fears that France is losing
jobs to lower-cost countries in Eastern Europe and Asia. Companies such
as Philips and IBM have already eliminated hundreds of jobs in France
in recent months while expanding their payrolls in places such as
Poland, China, and India. HP hasn’t said whether any of the jobs in
Grenoble will be transferred elsewhere. But employees note the company
has a fast-growing facility in Slovakia that performs some of the same
functions as its site in the Grenoble suburb of Eybens, which handles
an array of functions from customer support to software development.Eric Gaudé, an engineer at the Eybens facility, says that many laid-off
workers could probably find other jobs in the area — though probably
not as high-paying as at HP, where employee unions say the average
annual salary is about $48,000. The deeper fear, he says, is that HP,
which first set up shop in Grenoble in 1971, will eventually shutter
most of its operations here: “There’s a sense of treason.”Grenoble’s authorities have complained bitterly that when HP wanted to
expand the Eybens site in 1998, local governments spent more than $2
million to acquire and clear a piece of adjacent property that they
then resold to the company for less than $500,000. Patrick Starck, the
president of HP France, says HP never promised to create jobs in
exchange for the assistance. Moreover, he says that over the past
decade HP has paid more than $840 million in French taxes, including
about $90 million to the municipality of Eybens. “We’ve been a good
citizen,” he says.Dig a little deeper, and there’s still another reason for Grenoble’s
angst. Despite generous seeding from Paris, the Silicon Alps region has
not developed the rich ecosystem of high-tech startups and spin-offs
that makes Silicon Valley’s labor market so resilient. True, government
research sites such as the Laboratory for Electronic and Information
Technology (LETI) have served as incubators for some successful
startups. One is Soitec, a 13-year-old company with $167 million in
annual sales that is a world leader in supplying advanced insulation
technology to the semiconductor industry. Yet unlike Silicon Valley,
it’s relatively rare in Grenoble for people to quit their jobs at one
of the big high-tech outfits and take a stab at starting their own
businesses. Of 48 recent high-tech startups listed by the local
economic development agency, only a dozen were spun off from other
companies, while the rest were hatched at government labs. “France does
not have a culture of risk and entrepreneurship,” says Alain Lefebvre,
one of four former HP employees who started VoluBill, a Grenoble-based
company that provides customer-billing technology to mobile-phone
operators.Risk aversion may be one part of the problem, but government
regulations are another. Even a startup like VoluBill, with 55
employees, has to give two months’ paid vacation to its employees
because of worker-friendly French labor laws. Strict anti-layoff laws
mean that workers at big companies have come to expect that their jobs
are guaranteed for life — unless the company pays them handsomely to
leave. That’s what happened at HP in 2003, when the company eliminated
1,300 jobs in Grenoble through early-retirement plans and buyouts that
topped $250,000 for some workers. Under those conditions, it’s hardly
surprising that few employees strike out on their own.The outlook for Grenoble isn’t all gloomy. The pace of high-tech
business creation has picked up since 1999, when France passed
legislation allowing government researchers to take leaves of absence
to start innovative businesses, says Jean-Bernard Schmidt, president of
venture-capital group Sofinnova Partners in Paris. More recently,
France’s center-right government has started providing tax breaks to
companies trying to commercialize new technologies, while relaxing some
regulations on small businesses. For instance, in August, a new type of
contract was introduced that allows companies with fewer than 20
workers to fire new hires more easily. Some 30,000 such contracts were
signed in August alone.French startups also are benefiting from greater access to venture
capital. Sofinnova has financed recent startups originating from such
French giants as defense and electronics group Thales and
pharmaceutical maker sanofi-aventis Group (SNY ). “The ingredients are
now there,” says Schmidt. But the allure of the Silicon Alps may no
longer be enough to captivate HP and other multinationals. -
AuthorSeptember 30, 2005 at 11:04 AM
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