Hollande Gets Crisis-Protection Tips From Business-Friendly Lyon

Hollande Gets Crisis-Protection Tips From Business-Friendly Lyon
The Rhone-Alpes region, where Lyon is the biggest city, has 8.4 percent unemployment, less than the national rate of 10 percent. Photographer: Philippe Desmazes/AFP/Getty Images

Le Restaurant Alain Chapel, a Michelin-starred bistro on the outskirts of the French gastronomic capital of Lyon, shuttered this year, joining the lengthening list of casualties of Europe’s financial crisis.

“Restaurants were the first to suffer,” said Christine Ottavy, head of the Lyon Chamber of Commerce’s unit that advises local companies in financial distress. “Many small restaurants closed down because they didn’t have enough clients. Some bigger names that have been in the city for years also had difficulties and had to cut jobs to navigate.”

Eating out became a luxury with factory use around Lyon, France’s second-most industrial region after Paris, languishing below its 15-year average since the end of 2008, according to statistics institute Opale.

To counter the exodus of labor-intensive industries, Lyon’s local government is wooing companies in nascent sectors such as biotech, energy and pharmaceuticals, luring businesses from all over the world in what may serve as a model for France’s new President Francois Hollande as he seeks to stem job losses and shield the country from Europe’s more than two-year-old crisis.

In the past year, 30 companies, including Japan’s Toshiba Corp., the U.S.’s Baxter International and China’s Huawei Technologies Services Co. opened branches in the Lyon area, according to Agence pour le Developpement Economique de la Region Lyonnaise, or Aderly, the local development body. The investment may create 1,345 jobs in three years, it said.

Emulate Lyon

Hollande, a Socialist who may have to rely on the anti-capitalist fringe in parliament after the two-round legislative elections on June 10 and June 17, has studiously avoided meeting business leaders, even those who backed him in the presidential elections on May 6, magazine Challenges said this week, raising concern about his corporate friendliness.

During the presidential race Hollande named Gerard Collomb, the Socialist mayor of Lyon since 2001, his campaign adviser for relations between businesses and large cities. As president now, he may need to take a leaf out of Lyon’s playbook, said Arnaud Lacheret, a professor at business school Idrac in Lyon.

“There’s proximity between public officials and the business world that’s unique to Lyon,” he said. “Elected officials surround themselves with businessmen who understand economics, so talks aren’t all about political strategy. That’s something we could learn from at a national level.”

Hollande is trying to save France’s welfare state which, at about 31 percent of gross domestic product, is the world’s most generous and has more than 136 billion euros ($171 billion) of debt. He needs growth and jobs to be able to do that.

Job Losses

In the first quarter, Europe’s second-largest economy posted no growth. Its joblessness is at a 13-year high.

France has lost more industrial jobs than any other European country over the past decade. Labor unions expect companies including ArcelorMittal, Carrefour SA, Peugeot SA and EON France to cut as many as 45,000 jobs in the months ahead, an estimate that’s “realistic,” according to Labor Minister Michel Sapin.

Hollande is going to need new initiatives from France’s regions to revive growth.

The Rhone-Alpes region, where Lyon is the biggest city, has 8.4 percent unemployment, less than the national rate of 10 percent. The region has taken it upon itself to seek out newer growth engines to rekindle the economy.

“We’re pulling every lever we can,” said Pierre Preuilh, director at the Lyon Chamber of Commerce and Industry.

Road Show

The region, which also includes Grenoble, about 90 kilometers (56 miles) from Lyon, boasts an extensive network of local research labs and scientists to attract investments. It has the second-biggest number of patents filed in France, after the Paris region, according to the national Observatory of Science and Technology.

Aderly went on a road show in Northern Europe last month to make a case for investing in Lyon, Preuilh said.

Germany’s auto-parts company Robert Bosch GmbH plans to invest as much as 30 million euros in photovoltaic production in Venissieux, near Lyon, and will create 200 jobs, Aderly said.

“There are more companies being created and fewer local businesses closing down,” said Christine di Domenico, a professor at business school EMLyon. “That’s helped the region keep economic activity up.”

Lyon’s local commerce and industry were hit hard by the crisis. A slump in economic growth hurt specialty chemicals maker Rhodia SA and truck maker Renault Trucks, among the city’s biggest employers.

“Local industry got a real slap in the face in 2009 and 2010, and we felt the blow,” said Preuilh.

Need Investment

The Chamber of Commerce tried to help local businesses monitor signs of operations derailing and find financing, he added. It met with more than 1,200 companies in 2010 and about 1,000 last year to work through financial difficulties.

The region also tried to specialize in high-growth sectors like pharmaceuticals, biotech and clean energy, to help offset turmoil in industry and commerce.

Lyon is home to one of the world’s few P4 laboratories, which experiment with the most dangerous viruses. It is called Laboratoire Jean Merieux. There are only 10 such labs in the world. It’s the only one in France.

Inserm, the national health and medical research institute, manages the P4 lab and finances it. This has helped keep drug makers in the region and attract biotech companies.

Lyon is also leveraging its location between two wine-growing regions, Beaujolais to the north and Cotes du Rhone to the south, to lure tourists to the region and its new malls.

Shoppers Wanted

To boost tourism, the city sent a double-decker bus on a two-month tour to Europe’s cities.

“How do you get a second-rank European city like Lyon to stand out when everyone is talking about Berlin and Barcelona?” said Preuilh.

Lyon gets 4 million visitors just during the “Fete des Lumieres,” or festival of lights, in December every year.

The metropolis’ next challenge is turning the 6 million tourists who flock every year to visit its historic sites; its museums of tapestry and puppets; and to enjoy its renowned cuisine -- from famous chef Paul Bocuse and at its 24 Michelin-starred restaurants -- into shoppers.

France’s third-largest city after Paris and Marseille is putting finishing touches on its former industrial neighborhood south of the Rhone river that has been transformed into a modern shopping and business district. “Confluence,” its latest mall, opened in April with 53,000 square meters of shopping space.

The Lyon Part-Dieu rail station is the busiest in Europe, with 500 trains and about 80,000 people commuting through every day, according to national French rail company SNCF. It expects the number of passengers to rise to 130,000 in 2013.

“People go by Lyon to go skiing in the winter and to go to the South of France in summer,” said Preuilh. “We just have to find a way to get them to stop and spend.”

Before it's here, it's on the Bloomberg Terminal. LEARN MORE