Hollande vows ‘tough action’ to restore competitiveness

Updated 06 November 2012
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Hollande vows ‘tough action’ to restore competitiveness

PARIS: French President Francois Hollande pledged “tough decisions” as a new report recommended a “shock” 30-billion-euro ($ 38 billion) reduction in labor costs to improve the country’s industrial competitiveness.
The 22-point document was presented by its author Louis Gallois, former head of the French SNCF railways and of the EADS aerospace group which controls Airbus, to Prime Minister Jean-Marc Ayrault.
“Tomorrow the government will draw conclusions from the Gallois report and tough decisions will be taken,” Hollande told reporters in the Laotian capital Vientiane, where he is attending an EU-Asia summit.
He stressed the need for a “holistic policy” to address France’s flagging industrial competitiveness as the country faces the challenge of dangerously overstretched public finances, anaemic growth and a huge trade deficit.
Gallois said the need of the hour was a “sort of social pact between all the partners,” adding that a “shock” reduction in labor costs was needed to kickstart the economy.
“The French must back this collective effort,” he said, appealing to “patriotism.”
He proposed cutting employer payroll levies by 20 billion euros and those paid by employees by 10 billion euros over two or three years.
This would mean shifting part of the tax burden on to workers by increasing the so-called CSG levy which helps fund the social security system, or increasing the VAT sales tax.
The review, commissioned by Hollande and the latest in a line of such reports on what is wrong with the French economy, has been described by the right-wing opposition as a last chance to change direction.
France’s hourly manufacturing costs are 20 percent higher than the eurozone average, according to the EU’s statistics agency Eurostat.
But ministers have already rejected a suggestion Gallois made in July that what the country needs is a big and sudden “shock” to boost efficiency, saying instead that measures will be spread out over five years.
The spotlight is on deep structural reforms which run counter to French habits. But similar reports for the government in the past have tended to be quietly locked away where they cannot upset the voters.
This time the government — facing having to impose austerity policies as the economy stagnates — says the analysis will not be buried.
The share of French industry in global trade has shrunk from 6.3 percent in 1990 to 3.3 percent in 2011 as production costs have risen relative to those in other countries, in particular to euro zone neighbor Germany.
The government has set a target of eliminating during its five-year term the country’s 25-billion-euro ($31-billion) trade deficit excluding energy.
The competitiveness pact is shaping up to be a key initiative to rejuvenate the economy as the government is being forced to apply 37 billion euros ($ 47 billion) in austerity next year to meet the country’s EU fiscal targets.
With the unemployment rate rising back to 10.0 percent, pressure has been building on the government to act.
Gallois has already enraged unions by suggesting taking the labor cost issue by the horns and cutting payroll levies paid by employers.
Business leaders have piled pressure on the government, with the heads of 98 of the biggest French groups calling for a 30-billion-euro cut in welfare charges paid by employers over two years, along with massive cuts in public spending.


Harley-Davidson to move some production out of US to avoid EU tariffs

Updated 25 June 2018
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Harley-Davidson to move some production out of US to avoid EU tariffs

  • The shift in production is an unintended consequence of Trump’s administration imposing tariffs on European steel and aluminum
  • In response to US tariffs, the EU began charging import duties of 25 percent on a range of US products

Harley-Davidson Inc. said on Monday it would move production of motorcycles shipped to the European Union from the United States to its international facilities and forecast the trading bloc’s retaliatory tariffs would cost the company $90 million to $100 million a year.
The shift in production is an unintended consequence of US President Donald Trump’s administration imposing tariffs on European steel and aluminum early this month, a move designed to protect US jobs.
In response to the US tariffs, the European Union began charging import duties of 25 percent on a range of US products including big motorcycles like Harley’s on June 22.
In a regulatory filing https://bit.ly/2tA1ru0 on Monday, the Milwaukee, Wisconsin-based company said the retaliatory duties would result in an incremental cost of about $2,200 per average motorcycle exported from the United States to the European Union, but it would not raise retail or wholesale prices for its dealers to cover the costs of the tariffs.
The company expects the tariffs to result in incremental costs of $30 million to $45 million for the rest of 2018, the filing said.
“Harley-Davidson believes the tremendous cost increase, if passed onto its dealers and retail customers, would have an immediate and lasting detrimental impact to its business in the region,” the company said.
Struggling to overcome a slump in US demand, Harley has been aiming to boost sales of its iconic motorcycles overseas to 50 percent of total annual volume from about 43 percent currently.
In January, the company announced the closure of a plant in Kansas City, Missouri as part of a consolidation plan after its motorcycle shipments fell to their lowest level in six years.
In 2017, Harley sold nearly 40,000 new motorcycles in Europe which accounted for more than 16 percent of the company’s sales last year. The revenues from EU countries were second only to the United States.
Harley said ramping-up production at its overseas international plants will require incremental investments and could take at least nine to 18 months.
The company will provide more details of the financial implications of retaliatory EU tariffs and plans to offset their impact on July 24 when its second-quarter earnings are due, the filing said.
Trump vowed to make the iconic motorcycle maker great again when he took office last year.
In late April, Harley said Trump’s metal tariffs would inflate its costs by an additional $15 million to $20 million this year on top of already rising raw material prices that it expected at the start of the year.