Coronavirus controversy: LVMH and Kering backtrack to put employees on state assisted finance scheme

A coronavirus controversy has seen luxury giants LVMH and Kering backtrack on putting employees on a French government assistance scheme for the pay-out of salaries.

The Financial Times revealed the two luxury goods groups received a backlash after Chanel and Hermès, two smaller rival companies, announced they would cope without state support.

As the luxury industry faces the stark reality of a 35 percent shrinkage compared to 2019, the pandemic continues to wreak havoc across all areas of the sector. Chanel closed all its production sites in France, Italy and Switzerland as well as its Haute Couture workshops and ready-to-wear, crafts and jewellery. Yet despite the bleak outlook, the company said it would retain its 8,500 employees and maintain their salaries as part of a responsible solidarity plan.

LVMH, by contrast, intended to“put some workers on the government’s so-called ‘partial activity’ scheme across its various businesses soon after France entered lockdown on March 15”, reported the Financial Times on Tuesday.

Chanel said it did not want to “weigh on public accounts, so that the French State can come in priority to help more vulnerable companies” and also “concentrates its resources on the Health system, the medical staff and the organizations of rescue to the people, it said in a press release. More than ever, “in a spirit of mutual effort to prepare for the end of the crisis”, Chanel therefore invites its employees to invest in their “solidarity approach.”

Financial scheme in place to help vulnerable companies, not profitable giants

Employees at Louis Vuitton and Sephora were informed they would be partially funded by the state, only to have the decision reversed last week. Whereas the scheme is in place to help vulnerable businesses weather the storm, it would be impudent for highly profitable billion euro businesses to rely on the government for help.

Kering-owned Boucheron also backtracked on putting employees on the state assisted scheme, but has not made any public comments regarding reversing its decision.

Both Kering and LVMH are highly scrutinised both in France and abroad and neither needs a public relations disaster. A union representative told the FT: “I think they moved ahead too quickly and didn’t think about how it would look, and were caught out when competitors made their announcements. Those programmes are supposed to help fragile companies and workers who really need it, not the big profitable ones.”

Image via Louis Vuitton; article source: Financial Times