Feb. 12 (Bloomberg) -- Mohammed Khouna says he owes PSA Peugeot Citroen his life and livelihood. His children won’t get the same opportunities.
For seven years, the native of Morocco worked northern France’s mines, and even today his skin is pockmarked with black scars from the coal that helped fuel the country’s recovery after World War II. He saw “lots of friends maimed and killed” in those perilous years in the pits.
In 1978 he got a job on Peugeot’s assembly line. Within a few years, he was earning enough to bring his wife and children over from Morocco, and later he even bought a house and car.
His five children haven’t fared so well. Only two have jobs: A son is a security guard and a daughter works in a food store below the second-floor mosque he attends just a few hundred yards from the Peugeot factory in the downtrodden Paris suburb of Aulnay-sous-Bois.
“Life is a lot harder for this generation than it was for me,” Khouna, clad in a traditional Moroccan robe and embroidered prayer cap, said after the fourth of five daily prayer sessions. “I don’t envy them that at all.”
None of his kids, age 20 to 38, will be hired at Peugeot’s factory in Aulnay, where Khouna worked until two years ago. The automaker plans to close the plant at the end of 2014, taking 3,000 jobs with it. After months of stalling, the government has approved the closing in hopes that it may save enough money to ensure the survival of Europe’s second-largest carmaker.
A similar situation is playing out in other European auto manufacturing communities. Carmakers have announced more than 30,000 job cuts and five factory shutdowns in the region since last July in response to the biggest downturn in the market in nearly 20 years. Sales in Europe are forecast to sink in 2013 for a sixth straight year.
The workforce reductions don’t include positions lost by those indirectly dependent on the auto industry. In Aulnay, along with the 3,000 factory jobs, another 12,000 people at suppliers are likely to lose their positions as a result of the closing, according to the CGT union, which represents about 30 percent of the Peugeot plant’s workers.
Peugeot, which plans to eliminate 11,200 posts out of 100,000 in France, says the cutbacks are necessary to end losses that one union official last month put at 7 million euros ($9.4 million) per day. The automaker will likely post an operating loss of 677 million euros for 2012 when it reports results tomorrow, according to the average estimate of 19 analysts surveyed by Bloomberg.
“I wouldn’t be surprised if the French state ultimately took a large stake in Peugeot, helping restructure its operations,” said Jose Asumendi, a JPMorgan analyst in London who has an underweight rating on the shares. “It would be similar to what we saw with Chrysler in the U.S.”
The French automaker’s declining fortunes mean workers can no longer count on lifelong employment. Aulnay will be the first auto factory in France to close in 20 years. When the shutdown was announced, Franck Don, head of the CFTC union, said that Peugeot had “lost all its values.”
In Aulnay, “Les 3000,” a housing complex built in the 1960s for workers at the factory, stands witness to better days when the auto industry offered a ladder up, especially for North African immigrants recruited to fill its factories.
The area is a maze of characterless beige concrete blocks that contrast starkly with the street names: Rue Henri Matisse, Rue Paul Cezanne, Rue Michel Ange -- or Michaelangelo -- where a burnt-out Renault Clio sits by the curb.
The collapse in European auto sales -- Peugeot’s deliveries in the region plunged 13 percent last year -- and accompanying austerity measures in France are likely to have a far-reaching impact on an immigrant community that is often marginalized.
Unemployment in France’s North African communities reached 23 percent in 2011, the most recent data available, versus 8.5 percent for the non-immigrant population, according to France’s employment ministry.
Second-generation immigrants from developing countries are 20 percent more likely than their parents to be unemployed, and almost three times more likely than non-immigrants, according to a June study from France’s advisory council on integration.
The closure in Aulnay will add to the economic woes in the area around the town of 80,700. Air France-KLM Group, whose main hub at Charles de Gaulle Airport is three miles to the north, is planning 5,000 job cuts by 2015, joining the airport’s operator, Aeroports de France, and chemical-maker Sanofi in reducing headcount in the district.
Gerard Segura, Aulnay’s Socialist Party mayor, worries that the lost revenue and higher joblessness will stymie his efforts to regenerate the town, which was at the heart of riots in 2005. The community stands to lose as much as 5.5 million euros in corporate tax, he estimates.
More than 17 percent of the town’s total population is out of work, and the jobless rate for 18- to 25-year-olds tops 40 percent, Segura said in September. Nationwide, unemployment stands at 10.3 percent.
While Germany turned to Greek, Italian and Turkish workers to staff its factories in the 1960s and 1970s, French industry recruited heavily from its former colonies in North Africa, offering Moroccans, Algerians and Tunisians special visas and training.
President Francois Hollande last July labeled Peugeot’s plans to slash jobs as “unacceptable.” Now, with France teetering on the brink of recession, joblessness at a 15-year high, and the government pledging to shrink its budget deficit, he’s reversed course. Last week, Industry Minister Arnaud Montebourg called the closing inevitable.
“We don’t see any other way,” Montebourg told RTL radio.
Budget Minister Jerome Cahuzac on Feb. 8 floated the idea that France’s sovereign wealth fund could buy a stake in Peugeot if that would help rescue the company. Prime Minister Jean-Marc Ayrault’s office batted down the idea for now, saying it’s not on the agenda.
France yesterday got European Union approval to provide Peugeot with 1.2 billion euros in bond guarantees, ahead of a decision to come later on a broader assistance package worth 7 billion euros.
With Peugeot in crisis, Djaafar Ait Hammou and his friends aren’t looking to the automaker for a job. Instead, the 23-year-old heads to work most days at the same store as Khouna’s daughter, little more than a warehouse that sells Moroccan, Tunisian, and Algerian foods, with profits supporting the mosque.
“I only know people on short-term contracts,” he said of the plant, where 80 percent of the workers are of North African origin. “Only the old-timers have full-time work. The younger people are easier to manipulate.”
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