PARIS (Bloomberg) -- The French government has asked PSA/Peugeot-Citroen and Renault to “cease all business” with U.S. supplier Molex Inc. after the component maker stopped funding agreed payments to 283 workers who lost their jobs when the company closed a plant in the country last year.
Molex called the intervention “shocking.”
PSA called on Molex Ito resume severance payments to the fired employees and Renault vowed to review its ties with the supplier after France's Industry Minister Christian Estrosi demanded a boycott over a labor dispute between the supplier and the former employees.
Molex makes electrical parts for vehicle-cabling specialists, which in turn supply carmakers including PSA and Renault. The Chicago company halted the payments this month after 188 of the closed French plant's workers asked a labor tribunal to award them more money.
“We attach the utmost importance to Molex keeping its word,” Hugues Dufour, a PSA spokesman, said. The carmaker “is very attentive to its partners' compliance with French law, including second-tier suppliers. Molex is not the only supplier of cabling for our vehicles,” Dufour said.
Dufour and Caroline De Gezelle, a spokeswoman at Renault, both declined to comment on the value of Molex parts purchased annually from the French carmakers' front-line suppliers.
“Renault has taken note of the minister's comments,” De Gezelle said. “We're going to take a closer look at our supplier relationships.”
Estrosi's intervention came a day after Molex posted fiscal first-quarter net income of $75.1 million, compared with a $15.1 million loss a year earlier, and raised its dividend 15 percent to 17.5 cents per share.
French gov't court threat
The minister called Molex's decision to end the payments “unacceptable and scandalous,” and said the government will force the U.S. company to “explain itself before the French courts,” Agence France-Presse reported on Wednesday from a briefing after a cabinet meeting.
“That the French government would interfere in this fashion is surprising and frankly quite shocking,” Molex Vice President Ana Rodriguez said. “Governments don't usually boycott businesses and interfere in international business relationships, it's just not done in the western world.”
Molex had paid out about 50 million euros ($69 million), or 90 percent of its liabilities under the 2009 settlement, when it discovered that former employees were disputing the plan's validity in court, Rodriguez said.
“We felt we had no choice but to stop funding the social plan until some reasonable party could come in and mediate the situation.”