Job cuts in distressed economy pit Hollande against ArcelorMittal

It has been only a month since the French government, concerned about the country's declining competitiveness, began its 'Say Oui to France' advertising campaign to attract foreign investment. But ArcelorMittal, the Luxembourg-based company headed by India-born billionaire Lakshmi Mittal, the world's biggest steel maker, has been hearing a distinctly harsher message.

"We don't want Mittal in France because they haven't respected France," industry minister Arnaud Montebourg said in an interview published this week in the daily Les …chos, unable to conceal his frustration over the company's plan to scale back one of its three major French factories and eliminate hundreds of jobs. He called for "temporary nationalisation" and resale of the steel plant at Florange, in the eastern region of Lorraine.

The ugly dispute pits the French state, in its traditional role as defender of industry, against a company that is trying to reduce capacity in line with the slowdown in the European economy and to cut its $23-billion debt after Moody's cut its credit rating to junk. The company wants to close two mothballed blast furnaces at the Florange plant, cutting 629 jobs, while continuing to operate a part of the facility that processes steel for the car industry. Currently, the facility as a whole employs 2,700 people. In all, ArcelorMittal employs about 20,000 people in France.

With unemployment hovering above 10%, the Socialist government of President FranÁois Hollande is desperate to avoid more layoffs by name-brand companies. Several big employers, including PSA Peugeot CitroŽn, Air France and Sanofi, have announced big job cuts this year. But some analysts say that by taking such a strongly interventionist stand to protect steel workers, France risks sending the wrong signal to multinational companies, whose investment the economy needs if it is to stave off long-term decline. Hollande and Lakshmi Mittal, who serves as chairman and chief executive of ArcelorMittal, met on Tuesday evening at the …lysťe Palace in Paris, but did not resolve the dispute.

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