Smart, the small car unit of German automaker Daimler, has failed in its attempts to get workers in eastern France to work longer hours in exchange for employment guarantees.
The company's management said Wednesday that two of four labour unions had signed a pact that would have raised working hours to 39 from France's normal work week of 35 hours and guaranteed jobs at the Hambach factory until 2020.
However, the other two labour unions which represent a majority of employees signalled they would veto the deal, which would have paid workers for only 37 of the 39 hours they worked, and cut days off for white collar staff.
"It's over, the baby is stillborn," said Didier Getrey, a representative of the CFDT union at the factory.
A non-binding referendum on the deal among staff saw a narrow majority vote in favour, but revealed that most labourers opposed the plan while white collar staff were in favour.
France's government in recent years has worked to give companies more flexibility on working hours and conditions to increase the country's competitiveness and attractiveness, even if the 35 hour work week still remains the legal norm.
Smart's France factory produces some 100,000 of the company's two-seater model per year.