How to restructure ?

The French Syndrom

TMA European Conference

Madrid, June 2012

Confidential

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Sodimedical case study

Voluntary liquidation launched end of 2009. Site closure : April 2010.

Court actions launched by employees (October 2011) in front of labor court: dismissals are null and void for lack of economic reasons. Company condemned to provide work to employees.

The French mother company filed for pre-insolvency after this judgment.

Court of Appeal called null and void the liquidation of the company, on the ground of the economic dependency of the company with other Group companies.

Court of Appeal called social plan null and void (Jan. 2012): (à compléter)

• Employees still occupying the site, not getting paid and are not laid off.

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Who are we?

Oneida is specialized in helping companies contain the risks associated with their reorganizations :Social risksPolitical interferenceReputationLegal risks (1)

130/150 projects per year, pan European or local projects

Resizing, plant closures, post-merger integration, SSC…

In all industries and services

(1) with lawyers

Solvency

Insolvency

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… France is clearly among the toughest countries:

Low Medium/High Higher/very High

• UK• Scandinavia• Austria

• Others • France• Belgium• Spain

Poor profitabilityof the activityPartial Closure

High profitabilityComplete Closure

Delocalization

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Growing radicalism in France…

LAFARGELAFARGE

CONSTELLIUMCONSTELLIUM

GOODYEARGOODYEAR

UNILEVERUNILEVER

Plant closure cement factory

(74 jobs)

Hunger strike by 12 workers and the mayor of the town in front of Corporate HQs

Plant downsizing aluminum(120 jobs)

Boss-nappings with intensive media

coverage

Plant downsizingtyres

(1.000 jobs)

Legal guerilla action for last 3 years, violence,

delaying reorganization and putting divestment

at risk

Mustard factory closed in Dijon

(>100 jobs)

Strikes, products boycotts, political pressure, media

coverage

FRANCE

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Growing radicalism…

• Strikes, violence, very low productivity,, boycotts

• Endless consultations

• Legal fights

• Involvement of politicians, labor administration

• Negative media coverage

• Prerogatives of unions/works councils

• Strikes, violence, very low productivity,, boycotts

• Endless consultations

• Legal fights

• Involvement of politicians, labor administration

• Negative media coverage

• Prerogatives of unions/works councils

What can happen

FRANCE

• Legal uncertainty

• Uncontrolled planning

• High restructuring costs

• Reputation

• Damage on the business

• Puzzled stock market

• Legal uncertainty

• Uncontrolled planning

• High restructuring costs

• Reputation

• Damage on the business

• Puzzled stock market

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… is more a question of culture than of legal systems…FRANCE

Anglo-SaxonCountries

France, Latin Countries

• What is expected from the state

A legal framework allowing me to be

successful by myself

Protection, whatever happens

• Relationship with work

Transactional Emotional

• Dispute resolution Consensus Conflict• Communication Explicit, straight to

the pointImplicit,

Cartesian

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In case of voluntary liquidation/downsizings

Acceptable reason for collective dismissals :

o Poor financial situation

o Technology change

o Need to safeguard the competitiveness

Economic justification : must be very comprehensive

Social plan : very complex

Approach of discussions :

o Refusal for the Business case

o “Forget the rules” for social measures (strikes : very common)

FRANCE

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Involvement of many outsiders : financial advisor to the Works Council, politicians, courts,…

Very formal procedures

End-results required : opinion of Works Council

Duration of procedures : typically 3 to 6 months

Cost :

o Depends on CBA, age, seniority, quality of contingency plan…

o Anywhere between 40 K€ and 120 K€/head

o 4 major cost drivers (legal and additional severance, retraining leave, outplacement, job-creation tax)

In case of voluntary liquidation/downsizings (...)FRANCE

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In case of insolvency

An alert procedure may be launched by both statutory auditors and Works council – Not easy if a few weeks before announcement

The purpose of French insolvency procedures is to preserve employment, not maximize to return for lenders and others creditors.

Works council will elect a rep to attend court hearing related to the opening of the procedure.

Strong pressure on the Administration to find buyer for the business(es) which can be continued or sold.

Employees are dismissed by the Administrator : they get unpaid salaries and legal severance from French Public Agency (AGS)

Potential actions by employees against mother company/shareholders :

o Co-employment, Tort actions, Commingling of assets, de facto directors

Possible actions by Administration against group too.

FRANCE

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Try and reorganize without social plans

Be ready : target organization, social impact, planning…

Align management/reinforce/motivate

Communicate pro actively with most/all stakeholders

Take advantage of pre-insolvency procedures to communicate with Courts

Key success factors

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www.oneida-associes.com

63 bis, rue de Sèvres92 100 Boulogne BillancourtFrance (Paris)Tel : 33(1) 46 99 92 20Fax : 33(1) 46 99 05 02

Philippe GrabliSenior Vice President