GIAT Industries restructuring plan challenged

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In April 2003, GIAT Industries, the French arms manufacturer, announced a drastic restructuring plan involving major job losses, after having recorded losses for several years. Vigorous protests by trade unions, employees and local politicians led to the opening of talks on an 'agreement on methods' for consultation over the restructuring, which would temporarily suspend the plan’s implementation.

GIAT Industries, the armaments manufacturer, is a state-owned company which began operating under private law in 1990, at the same time as the Warsaw Pact was being dissolved. The mission assigned to it at this time was to rationalise the French arms industry’s production capacity and open up to foreign markets and industrial partnerships, against a backdrop of overall retrenchment in military staffing and funding, both in France and the rest of Europe.

In the early 1990s, GIAT Industries concentrated on the development and marketing of the sophisticated Leclerc combat tank. The French army, which had kept close track of the specific features of the Leclerc so that its own requirements were satisfied, planned to order 1,400 of them. In the end, only 406 were ordered. Moreover, the product’s economic viability was definitively compromised when 390 were sold to the United Arab Emirates in April 1993, as the terms of the contract turned out to be particularly restrictive. Other GIAT products experienced a similar fate, such as the Caesar transportable howitzer. Tried and trusted products with high reputations, like the FAMAS assault rifle, are still 10 times as expensive as a Kalashnikov AK47.

An ambitious French arms policy drawn up by the Ministry of Defence's Arms Bureau ultimately proved very costly for the GIAT Industries group. GIAT Industries’ turnover fell from EUR 1,098 million in 1998 to EUR 777 million in 2002. The value of the company’s order books followed this downward trend over the same period, dropping from EUR 3,049 million in 1998 to EUR 2,360 million in 2002. Moreover, staffing levels mirrored this development; starting off at 18,000 in the early 1990s, GIAT Industries had only 10,000 employees by 1998 (FR9807124N) and a little over 6,200 by 2002.

A restructuring programme for 2003-6, known as 'GIAT plan 2006', was presented to the boards of group's companies and the group works council on 7-8 April 2003. It suggests basing GIAT’s development on its future-oriented activities and expertise in line with market trends. With GIAT Industries having fallen from second to fifth place internationally in the production of land armaments, the planned restructuring should enable the company to consider joint ventures and/or mergers in Europe.

To achieve this, management is advocating cutting 4,000 jobs by 2006, in order to end up with a 2,500-strong workforce, including a few jobs to be created over the three intervening years. Under the terms of this plan, two plants in Cusset and Saint-Chamond will be closed down, and a third, in Tarbes, will suffer serious cutbacks.

From the legal perspective, fixed assets will all be owned by a new subsidiary, GIAT Systèmes, itself containing several other subsidiaries. The current GIAT SA will retain those assets to be shed in the next few years. Over the 2003-6 period, the state will provide EUR 1.3 billion for various purposes, and the Ministry of Defence will establish a 'company contract' setting out a level of land armament orders and a minimum 'operational readiness management' (maintien en condition opérationnelle, MCO) workload. By the end of 2003, the group aims to break even, with a turnover of around EUR 460 million (compared with EUR 777 million in 2002).

The trade unions at the GIAT Industries group have set up an inter-union committee comprising the French Democratic Confederation of Labour (Confédération française démocratique du travail, CFDT), the French Confederation of Professional and Managerial Staff-General Confederation of Professional and Managerial Staff (Confédération française de l'encadrement-Confédération générale des cadres, CFE-CGC), the French Christian Workers’ Confederation (Confédération française des travailleurs chrétiens, CFTC), the General Confederation of Labour (Confédération générale du travail, CGT), and the General Confederation of Labour-Force Ouvrière (Confédération générale du travail-Force Ouvrière, CGT-FO). The committee called for stoppages and demonstrations in protest at the restructuring plan. The elected members of the company-wide central works council also invoked their 'right of warning' that enables them to require detailed explanations on anything that may seriously affect the company’s situation. Furthermore, they asked the President of the Republic (and head of the armed forces) and the Prime Minister for a moratorium to put a stop to 'a suicidal strategy for a state-owned company so fundamental to the independence and sovereignty of France'. Local politicians in the areas whose plants are set to close under the restructuring plan have also mobilised.

Talks between the management of GIAT Industries and the unions have begun on a 'agreement on methods' (accord de méthode). This type of agreement, provided for in the recent 'social modernisation' law (FR0201102F), allows for the implementation of a restructuring plan to be suspended so that the consultation procedure can be reviewed, and an external expert can be brought in.