Relocation of production on the rise in France | Company | Economic and financial news from a German point of view | DW



A few years ago, the French medium-sized company Auer decided to shift its production from boilers using conventional fuels to energy efficient heat pumps.

For this transition, the family business deemed it necessary to bring back to France part of its production capacity from countries such as Poland and Serbia.

“We are renewing the production of enamelled steel tanks because they are a strategic part of our heat pumps. This helps us protect our innovations, ”Auer CEO Lionel Palandre told DW.

“Thus, we reduce our overall production costs through automation and lower freight costs while no longer having to deal with long transport delays,” he added.

Relocation plans were almost abandoned

But this relocation process is said to have almost stopped last year due to the pandemic.

“The French market had practically collapsed because of COVID-19 and we didn’t know when it would resume. It made us question our decision to move,” said Palandre. “But when we then got the offer of support from the government, we knew we had to go.”

The manufacturer has secured a government grant of € 800,000 ($ 946,000) for its latest investment of € 5 million in new production facilities at its headquarters in Feuquières-en-Vimeu, in northern France. This year, Auer will add 10 jobs.

Auer CEO Lionel Palandre is convinced that the relocation of production will help protect innovations

France relies on relocation

The company is not an isolated case. The return of industry to France is part of the country’s plan to revive its economy affected by the pandemic.

“We are providing € 500 million in government support to 500 relocating companies,” the country’s Minister of Industry, Agnes Pannier-Runacher, told DW.

“Our country has been deindustrialised for 30 years – industry represents only 12% of our GDP today compared to 23% in Germany. And yet it is the backbone of our economy – we want to strengthen our industry. “

She added that the pandemic had highlighted the downsides of global supply chains.

“Companies have realized that offshoring can make them less competitive when global supply chains are suddenly disrupted. In addition, when you produce locally, you can react much more quickly to changes in the market and it is easier to come up with new prototypes, ”she explains.

A customer rethinking

The pandemic has also caused customers to rethink the type of products they would like to buy, says Julien Bianchi, managing director of clothing and footwear manufacturer TBS. The company sells its products to wholesalers and through its some 40 stores across France.

“More and more customers who come into our stores are asking specifically if our clothes are made in France – there is a real appetite for locally produced products,” he said.

This convinced Bianchi to transform a prototype workshop in Saint-Pierre-Montlimart in western France last year into a small production area with currently seven employees. Their number will be increased to 10 this fall.

“Our production costs there are 30% higher than in Turkey where we still produce a large part of our clothes,” he explained. “But we are making a profit with these clothes made in France and cannot meet the demand.”

Bianchi says the company is now in a “growing pains”: “We have orders of 16,000 items per year but only an annual production capacity of 11,000.”

TBS plans to increase to 30 employees in its new unit over the next few years. He will spend € 500,000 to set up a new workshop and buy new machines. The manufacturer hopes the government will pay for half of this investment.

“Hundreds of thousands of jobs” could be created

And companies like Auer and TBS could only be the start, thinks David Cousquer, CEO of Trendeo Consultancy which has been monitoring relocation activity in France in recent years.

“In 2019, around 20 companies relocated their production capacities. This number rose to 30 last year and will probably reach as high as 80 this year,” he told DW, adding that hundreds thousands of jobs could be created in the long term.

But there are limits.

“For now, only small and medium series production units are relocated,” he said. “And we won’t be able to bring our entire industry back – we don’t have enough qualified people anymore.”

Auer plans to relocate even more jobs

Auer’s Palandre, however, is determined to implement the company’s relocation plan. “We will add 50 to 70 more jobs over the next five years and train new staff ourselves as needed,” he said.

To accommodate them, the company will build a new hangar by September of next year.

“To be competitive, we need to keep control of our innovations and our critical components, especially in a rapidly changing market like environmentally friendly heat pumps,” he said.



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