Money alone can’t stop Europe’s industrial twilight

CHOLET, France — The workers at the Michelin tire factory, even those who weren’t on shift that day, had been asked to come in for a 9:30 morning meeting. Minutes later, some were crying, others were booing. A few remained silent.

Despite Michelin receiving millions of euros in government assistance, management said the factory in this small French city could no longer compete with its Asian rivals. The assembled employees would have to look for new jobs. They were among the 1,254 workers being dismissed by the company across France.

“It took them less than 10 minutes,” said Patrick Boëhm, one of the sacked workers, as he warmed up by a fire at the picket line outside the factory in late November, a few weeks after being laid off.

The scene at the factory owned by Michelin — one of France’s most iconic industrial brands — is playing out across large swathes of Western Europe as its economy staggers under pressure from global competition, energy prices made higher by the war in Ukraine, and what some policymakers have described as suffocating red tape.

What’s more, the hundreds of billions of euros spent since the pandemic to keep factories open and jobs at home now seem to have been little more than a very expensive stopgap solution.

Europe’s economy is shriveling and bleeding jobs. Industrial production in the eurozone dropped 1.2 percent last year, continuing a trend that has seen the loss of more than 2.3 million jobs in the sector in the past 15 years, according to trade unions.

The fate of the workers in Cholet, one of two factories Michelin closed in France last year, illustrates a problem money may be unable to solve — just as the continent is bracing for another round of economic turmoil caused by tariffs expected to be imposed by United States President Donald Trump.

Other French companies like Auchan, Valeo and ArcelorMittal are also laying off hundreds of employees. In 2024, France registered the highest number of company bankruptcies in the past 15 years, a recent study found. The massive tide of layoffs has already spread across Europe, including in the bloc’s industrial engine, Germany, where Michelin is also shuttering two plants and Volkswagen is cutting 35,000 jobs.

Industrial decline has been accompanied by a rise of the far right. In France, Marine Le Pen’s National Rally party pulled off its best-ever showing in last year’s parliamentary election, giving the once-pariah party the ability to bring down the government. In Germany, the far-right Alternative for Germany, some of whose leaders have aped Nazi slogans, pulled in over a fifth of the vote in a Feb. 23 election.

The risk of social unrest, like that of the Yellow Jackets that paralyzed France five years ago, is growing.

“France is one step away from exploding,” said Gilles Bourdouleix, the far-right mayor of Cholet for almost 30 years, sitting in his modern office in a brutalist city hall building. “The Yellow Jackets protests are just a warmup of what is still to come.” 

‘Slow agony’

Mario Draghi, the former president of the European Central Bank, warned in his much-anticipated report last year that the continent faces a “slow agony” of decline if it doesn’t find a way to retool the economy.

The laid-off workers in Cholet know firsthand what it means to suffer slow agony. They responded to the closure in the French tradition, holding a strike and erecting a high wall of tires blocking traffic in and out of the factory.

On a day not long after the closure, workers could be found warming themselves by wood fires as volunteers cooked crêpes and sipped coffee to the sound of someone playing “the House of the Rising Sun” on a guitar. Cars and trucks passing by sounded their horns in solidarity, and every few minutes someone stopped to offer wood to stoke the fire.

Today, the wall of tires has come down, but the resentment has only grown. “Les Michelins,” as the company’s workers are called in Cholet, argue that the layoffs weren’t necessary, and accuse the company of wanting to maximize profits by moving production to countries with lower labor costs like Poland.

“They told us that the Chinese are stealing our job, but this is totally false,” said Jacques Roux, a Michelin worker on the picket line.

Roux and his colleagues are particularly incensed by the fact that Michelin raked in €3.6 billion in profit in 2023, a significant chunk of which went to shareholders in the form of dividends, while still laying off workers.

“There should be a sanction to force big companies that make profits not to lay off,” Roux said.

Then there’s the matter of the generous financial support the government has provided to major French businesses. Michelin told POLITICO in an email that it received €42 million from the French state in the form of tax breaks for research and development in 2023. The money was not linked to a promise to keep tire production in France.

The company said it would never commit to keeping its “industrial footprint” in a specific country as it would be “contrary to the very principles of adapting a company to its environment, for strategic, political or economic/competitiveness reasons.”

“We like competition, but it’s not fair to pit a team of 11 players against a team of 22 who can catch the ball with their hands,” Michelin chief executive Florent Menegaux told French senators questioning him about the layoffs at his company.

Creative destruction

As Brussels launches an effort to make the European economy more competitive by slashing regulation and ramping up public spending — a new package of measures was unveiled on Wednesday — as well as relaxing anti-subsidy rules, the closure of factories like the one in Cholet shows the limits of that approach.

In his seven years as president, Emmanuel Macron has tried to prioritize jump-starting French industry, combining generous subsidies with tax breaks. Between 2020 and 2022, France spent approximately €27 billion per year in financial support for the industrial sector, according to a recent report by France’s court of auditors.

The financial efforts under Macron’s tenure initially bore fruit: France opened more new factories than it closed before the trend reversed last year. Unemployment declined and stabilized at around 7 percent. And the country became Europe’s most attractive destination for foreign investors.

But that is little consolation to factory workers in sectors where the European economy is unlikely to be able to compete, whatever economic assistance it receives.

French Industry and Energy Minister Marc Ferracci told POLITICO that the government is stepping in where it can to stop a mass exodus of jobs, and that it will monitor Michelin’s commitment to compensate sacked workers and help them find work. But not every job can be be saved, Ferracci said. Economists call this creative destruction — allowing dated, uncompetitive companies to die to make way for investments in more promising sectors.

“If we start to impose a moratorium on layoffs, I can assure you that there are a whole bunch of job-creating investment projects that stop two hours after that announcement,” Ferracci added.

The politics of subsidies

If Europe wants to ensure that job losses in traditional sectors are compensated by growth in new sectors, it needs to redirect public money to innovative technologies and research, said economist Philippe Aghion — something European policymakers have yet to do.

“In Europe, the dominant companies nowadays are the same ones of 25 years ago. In the U.S. it is not the case,” he said.

Just look at artificial intelligence, which a quarter century ago was the stuff of science fiction.

Mere days after his inauguration, Trump announced that Washington had secured a staggering €500 billion package for the country’s burgeoning AI sector. France has its own €109 billion AI plan, while the EU is aiming to leverage €200 billion worth of investment in the field.

Industry titans and politicians may rejoice at such announcements, but telling workers they’ll lose their job today to make room for better ones tomorrow isn’t an easy sell.

“It is a political message that’s a little unpleasant to hear,” said French economist Sarah Guillou, noting that creative destruction and its social consequences are invariably unpopular in the short term.

“Economic dissatisfaction is always the breeding ground for political dissatisfaction,” she said.

Even if workers at Michelin and other European factories do find new jobs, the wave of layoffs is likely to fuel dissatisfaction with their governments.

That’s certainly true in France, where Macron, once regarded as a paragon of good economic management, is losing ground to far-right and far-left opponents who say he is responsible for what they describe as the country’s economic collapse and a skyrocketing budget deficit.

“We are now paying for the effects of catastrophic policies,” said Aurélie Trouvé, the president of the National Assembly’s economic affairs committee and a member of the left-wing France Unbowed party.

“It’s not creative destruction, it is destruction full stop,” said Trouvé, who predicts there will be more social unrest in the months ahead. Similar criticism can be heard from the far right.

At the picket line in Cholet, workers were focused on what happens next.

Roux, one of the strikers, showed off a whiteboard with the names of workers who had volunteered to guard the factory’s gates during the night.

“Talking about the future, the goal is that this doesn’t happen again in the coming years,” he said.”And it depends on politics, that’s for sure.”