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Cablegate: Labor Dispute at Molex Automotive Sarl

VZCZCXRO9085
PP RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV RUEHSL RUEHSR
DE RUEHFR #1216/01 2471543
ZNR UUUUU ZZH
P 041543Z SEP 09
FM AMEMBASSY PARIS
TO RUEHC/SECSTATE WASHDC PRIORITY 7098
RUCPDOC/USDOC WASHDC PRIORITY
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE

UNCLAS SECTION 01 OF 02 PARIS 001216

SENSITIVE

NOT FOR INTERNET DISTRIBUTION

SIPDIS

STATE FOR EB and EUR/WE

E.O. 12958: N/A
TAGS: ELAB ECON EIND EINV ETRD PREL FR
SUBJECT: LABOR DISPUTE AT MOLEX AUTOMOTIVE SARL

SUMMARY
-------

1. (SBU): Negotiations over the closure and loss of 280 jobs at
Molex Automotive SARL, a US-owned automotive supplier near Toulouse,
have taken a sharp turn for the worse. Discussions on a buyout
between Molex and an investment fund brought in by the GOF ended in
a stalemate. Minister of Industry Christian Estrosi accused the
U.S. firm of bad faith and threatened to call on French auto firms
to boycott Molex. President Sarkozy weighed in publicly against
Molex, arguing that the company's rejection of the proposed buyout
is part of Molex's efforts to prevent competitors from entering the
market after its departure. Renault announced it would reevaluate
its relations with Molex. Talks conducted by a GOF-appointed
mediator with unions on the "social plan" of layoff benefits
appeared to be making some progress, but broke down after the GOF
interventions. Molex is fast reaching its own deadline for closing
in France and threatens to allow its subsidiary to go bankrupt if a
negotiated outcome is not in the offing. End Summary.


2. (SBU) Molex Incorporated is a global electronic components
company based in Lisle, Illinois. In October 2008, the company
announced it was closing Molex Automotive SARL, a plant near
Toulouse producing connectors for the automotive industry. A local
judge approved the closure as justified by difficult economic
factors within the automotive sector and Molex initiated
negotiations on severance and retraining benefits as required by
French labor law, and also began looking for a buyer for the
facility.

3. (SBU) The leftist Confederation Generale du Travail (CGT) leads a
group of unions that represent Molex workers and the local has a
radical tendency. The union has consistently rejected the firm's
decision to close the plant as illegitimate and has refused to
negotiate a severance and retraining package. The union claims that
since the plant turned a profit last year, the decision cannot be
based on economic factors.

4. (SBU) In April 2009, angry workers at Molex "boss-napped" two
managers for nearly 48 hours. (Note: This was one of a series of
instances during the first half of the year in which managers were
detained as a high pressure negotiating and media grabbing tactic.
French officials subsequently denounced the practice, but none of
these cases have been treated as hostage-takings. One of the Molex
managers subsequently told EMIN that while the boss-nappers clearly
did not intend physical harm, they were mostly inebriated, a
situation that could easily have become dangerous. End Note.) The
workers told the press that management failed to provide documents
to a consultancy firm hired by the union to prepare an expert report
challenging the economic justification for closing. Workers
expressed frustration in media reports when the company reportedly
dismissed the consultancy's findings and launched legal action
against the works council representing employees for detaining the
two managers. In response, employee representatives voted to stage
an unlimited strike. On July 7, Molex workers went on strike and
solicited national and local authorities to prevent the plant's
closure.

5. (SBU) On August 5, Molex' U.S.-based Director of Business
Development Eric Doesburg was assaulted by Molex employees and
pelted with eggs. He had had recent knee surgery and stated that he
sustained some injuries in the assault leading him to file a
criminal complaint. Two French security guards were also jostled by
Molex personnel and property was damaged. French police did not
intervene, though versions differ on whether and when they were
called, and on what actually happened outside the plant.

6. (SBU) The following day Doesburg turned to the American Presence
Post in Toulouse for assistance and APP Toulouse contacted Embassy.
The APP had been in touch with Molex regularly over last the year
but had become involved in any business decisions. Embassy followed
up at once through RSO law enforcement liaison channels. In
addition to the police channel, EMIN spoke with Economy Minister
Lagarde's chief of staff and with the Invest in France Agency and
met with Industry Minister Estrosi's chief of staff. French
officials condemned any use of violence or force by union members
and assured us that measures would be taken to ensure safety and
security.

7. (SBU) On August 13, President Sarkozy instructed Minister
Estrosi to appoint a mediator, which he did at once. In a press
release, Sarkozy reiterated the legal obligations of companies that
are restructuring (i.e. closing): to search for industrial solutions
and provide professional retraining. Dialogue is absolutely
crucial, he stressed, while condemning the use of violence.

PARIS 00001216 002 OF 002


Minister of Economy Lagarde echoed Sarkozy's key messages in a media
interview: the social dialogue must never be interrupted and every
effort must be made to save jobs and find an acquirer. However,
there will be situations when jobs can't be saved, after all Lagarde
stated: "Foreign investment in France is determined by investors".

8. (SBU) Molex's Doesburg returned to France the following week
and met with both Elysee staff and with EMIN before heading to
Toulouse for his first meeting with the mediator. He then met with
Minister Estrosi in Paris August 25. The Industry Ministry insisted
that Molex offer to sell not only its plant, but some part of its
product line and customer base, which the firm refused to consider.
9. (SBU) Despite some progress in the mediated negotiations
regarding the social plan, Minister Estrosi issued an accusatory
press release on September 2 and called for a boycott of Molex
products by French auto producers unless the company agreed to an
acquisition This followed the failure of Molex to cut a deal with an
investment firm brought in by the GOF. On September 3, President
Sarkozy told the press that if there is a buyer for Molex, it will
benefit from GOF backing and restated his priority for an industrial
solution. He claims that it is not "fair play" for Molex to leave
and try to thwart a buyout and thus prevent a competitor from
entering the market. Sarkozy denounced the way the U.S. company was
handling the shut-down, in particular, its treatment of the workers
"who are not merchandise" and noted that in the U.S. as in France,
there "are values to respect." According to Molex (maintain strict
business confidentiality) the investment firm wanted Molex to
guarantee future operating losses at the company while leaving
behind a part of its production and order book, in addition to
paying in advance, or putting in escrow, the possible future closing
costs.

10. (SBU) On September 4, Molex appeared in labor court over one
aspect of the dispute. Ninety-six out of 283 Molex employees are
claiming salary payments for the month of August when they were on
strike. The court will render its decision on September 18.

11. (SBU) The USG is not a party to this negotiation. We
intervened strongly to protest lack of adequate police protection
during the standoff. Since that incident, we have remained in
close, ongoing contact with Molex and have provided our assessment
of political and economic factors when requested. We have also
emphasized to the GOF that the continuation of this dispute could
only harm the perception of France's investment climate in the
United States. =On September 3, Ambassador Rivkin raised in a low
key manner our concern regarding the dispute and the GOF
intervention with the president of France's employer federation
(MEDEF)and with Minister of Economy Lagarde EMIN also raised with
Invest in France agency head.

Comment and Action Request
--------------------------

12. (SBU): The GOF appears willing to draw out the labor mediation
process to be able to claim having tried to save jobs and for
setting a moral standard for economic layoffs. Extending the
conflict serves the unions interest. The GOF does not seem to
appreciate the damage being done to France's investment climate
reputation. Officials are hesitant to get involved given to the
increasing level of politicization by Estrosi and President Sarkozy.
It should be clear to all parties at this point that Molex will
close this plant shortly, either in an orderly fashion, with a
substantial severance and retraining package, or when the subsidiary
goes bankrupt. Post has made clear to Molex that we are prepared to
highlight our assessment to the GOF at an appropriate moment.
Embassy also requests any appropriate Washington trade policy
guidance to respond forcefully to the GOF's planned boycott of Molex
products.
RIVKIN

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