Reshoring on the rise in France
Paris, July 02: Mid-sized French company Auer decided to shift its production away from boilers using conventional fuels to energy-saving heat pumps a few years ago.
For that transition, the family firm deemed necessary to bring parts of its production capacity back from countries such as Poland and Serbia to France.
"We are reshoring the production of enameled steel tanks, because they are a strategic element of our heat pumps. That helps us protect our innovations," Auer Director General Lionel Palandre told DW.
"Thereby, we are reducing our overall production costs through automatization and lower transport fees while no longer having to deal with lengthy transport delays," he added.
Reshoring plans were almost abandoned
But that reshoring process would have nearly ground to a halt last year due to the pandemic.
"The French market had practically collapsed because of COVID-19 and it was unclear when it would pick up again. That made us question our decision to relocate," Palandre explained. "But when we then received the offer of government support, we knew we had to go for it."
The manufacturer obtained an €800,000 ($946,000) government subsidy towards its latest €5 million investment in new production facilities at its headquarters in the northern French town of Feuquieres-en-Vimeu. This year, Auer will be adding 10 jobs there.
France is betting on reshoring
The company is not an isolated case. Bringing back industry to France is part of the country's plan to relaunch its pandemic-hit economy.
"We are providing €500 million of government support to 500 companies that are reshoring," the country's industry minister, Agnes Pannier-Runacher, told DW.
"Our country has been deindustrialized for 30 years — industry only represents 12% of our GDP now compared with 23% in Germany. And yet, it's the backbone of our economy — we want to restrengthen our industry."
She added that the pandemic had underlined the downsides of global supply chains.
"Companies have realized that offshoring can make them less competitive when global supply chains are suddenly interrupted. Plus, when you are producing locally, you can react much more quickly to market developments and it's easier to come up with new prototypes," she explains.
A customer rethink
The pandemic has also had customers rethink what kind of products they'd like to purchase, states Julien Bianchi, director general of clothes and shoe manufacturer TBS. The company sells its products to wholesalers and through its roughly 40 shops across France.
"More and more clients entering our shops are specifically asking if our clothes are made in France — there's a real appetite for locally produced goods," he said.
That convinced Bianchi to last year transform a prototype workshop in Saint-Pierre-Montlimart in western France into a small production area with currently seven employees. Their number will be boosted to 10 this autumn.
"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 can't keep up with demand."
Bianchi says the company is now in a "growth crisis": "We have orders for 16,000 items per year but only a yearly production capacity of 11,000."
TBS plans to scale up to 30 employees at its new unit over the next few years. It'll spend €500,000 to set up a new shop floor and purchase new machinery. The manufacturer is hoping the government will pay for half of that investment.
'Hundreds of thousands of jobs' could be created
And companies like Auer and TBS could be only the beginning, thinks David Cousquer, CEO of Trendeo Consultancy that has been monitoring reshoring activity in France over the past few years.
"In 2019, about 20 companies reshored production capacities. That number rose to 30 last year and will probably reach up to 80 this year," he told DW, adding that hundreds of thousands of jobs could be created in the long run.
But there are limits.
"For now, only small and mid-sized serial production units are being reshored," he stated. "And we won't be able to bring back all of our industry — we no longer have enough qualified personnel."
Auer plans to reshore even more jobs
Auer's Palandre, though, is determined to go through with the company's reshoring plan. "We will add another 50 to 70 jobs over the next five years and train up the new personnel ourselves if needed," he said.
To accommodate them, the company will construct a new hangar by September next year.
"In order to be competitive, we need to stay in control of our innovations and critical components — especially in a fast-evolving market such as the one for eco-friendly heat pumps," he emphasized.