Steven Pearlstein :
©Washington Post, August 7, 2001
As Cost Cuts Get Global, U.S. Jobs Are First to Go
(Layoffs Are More Difficult in Europe and Asia)
WASHINGTON For most of the past decade, economists,
politicians and business executives crowed 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 people at Alcatel, 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 this year, Alcatel lost
little time in closing some of its newly acquired U.S. plants,
eliminating 5,000 of its U.S. positions - slightly more than one in
four.
But back home in Europe it has been a different story. Alcatel has
been under political siege since June, when the company's
chairman announced a 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's 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
has made a relatively modest 4,000 job cuts in its European work
force of 70,000. 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, the Finnish maker of cellular telephones, half have
been in the United States, despite the fact that only 20 percent of
its employees are located there.
Of the 10 chemical plants that the German chemical company
BASF 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 non-U.S. companies now accounting for about 6 percent of
the American work force - and an estimated 15 percent of
manufacturing employees - the behavior of these multinationals is
of more than trivial concern to Americans. As it turns out, it is not
just foreign-based companies that are looking to their U.S.
payrolls for cost savings.
Alcatel's rival Lucent Technologies 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.
Du Pont, which last year had half of its sales and half of its
employees outside the United States, will make 70 percent of its
job cuts in America.
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, where the company has one-third
of its employees.
"Although CEOs claim to make global reductions evenhandedly, 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.
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. Because of the
political sensitivity surrounding layoffs, most are unwilling to make
executives available to answer questions about it.
But the flexibility of U.S. labor laws appears to be 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. They also prohibit
hiring of replacement workers during strikes. In France, layoffs are
done not necessarily by seniority but by who needs the job the
most.
In the United States, most of these issues are left up to companies
and their employees. The rules in other countries tend to be
referred to pejoratively as "inflexible" labor laws. In Europe, those
rules are considered positive - part of the social safety net.
Delphi Automotive's chief financial officer, Alan Dawes, said that
changing customer demand and relative efficiency were the main
determinants of where jobs were cut at his company. The cost and
delays required to shut plants, however, are certainly a secondary
factor, he said. In March, Mr. 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.
Even Mr. Tchuruk at Alcatel 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 magazine in May. "But it is true that the
rate at which you can do things is slower in Europe."