French arms industry hit by massive losses

MARY DEJEVSKY

Paris

Thousands of workers in the French defence sector may lose their jobs after one of France's main arms producers, the state-owned GIAT (Groupement Industriel des Armements Terrestres) yesterday announced a loss for 1995 of almost 12bn francs (pounds 1.6bn), one of the worst results ever posted by a French company.

The loss, which is six times as high as that announced for 1994, on a turnover estimated at below Fr8bn, highlights the desperate plight of the French defence industry five years after the end of the Cold War and is likely to accelerate long-planned restructuring.

The Defence Minister, Charles Millon, made restructuring of the armaments sector a major part of his New Year address to journalists yesterday. Speaking carefully, he said his watchwords would be "clarity, consensus and decision". In a clear attempt to avoid the sort of industrial unrest provoked by government welfare reform plans at the end of last year, Mr Millon said that the search for consensus would be allocated "as much time as it takes", but the decisions, once taken, would be kept to.

GIAT and the defence sector generally have been caught between two imperatives, both beyond their control: reduced orders from the French defence ministry and abroad following the end of the Cold War, and the Chirac government's determination to cut the domestic budget deficit. Defence spending has been a major victim; the arms procurement budget in particular has been cut by 16 per cent.

Some 300,000 people are employed directly or indirectly by the defence industry in France; 30,000 jobs have been lost in the past two years alone, and arms enterprises are concentrated in areas of already high unemployment - chiefly in Brittany and Aquitaine.

As one French analyst put it succinctly this week: "It was thought better not to touch the peace dividend lest it became a social nightmare." Forecasts are that the defence sector will have to shed at least 50,000 jobs, probably in the next two years. Already, industry representatives are comparing the situation with the contraction of the French steel industry in the 1980s and calling for massive state aid for affected areas.

The problems of GIAT, which employs more than 11,000 people and whose main product is the Leclerc tank, reflect those of the industry as a whole - several times over. It has suffered severe competition from the German Leopard tank and from falling demand for land weapons. When France overtook the US to become the biggest arms supplier to the Third World last year, this was thanks to sales of aircraft, ships and submarines, not land weapons.

Last November, a parliamentary report on the armaments sector as a whole said that the group was in real danger of dying and said it would have to lose "several thousand" jobs. It described a "critical situation" which, it said, had been exacerbated by management and investment errors. In particular, proceeds from a big tank order from the United Arab Emirates in 1993 appeared to have been squandered.

An adviser to the defence minister said that criminal charges could "not be ruled out" in connection with the losses.