Où est la Thatcher française?

This article speaks volumes about the French government’s understanding of global business practices:

French President Francois Hollande has met the boss of General Electric’s (GE) to discuss his firm’s interest in buying part of engineering firm Alstom.

It follows reports the US company is preparing a deal to buy Alstom’s power turbines business.

Alstom, which also makes TGV high-speed trains, is one of France’s biggest private sector employers.

Alstom is one of France’s biggest private-sector employers, with 18,000 staff across the country.

Its share price jumped by 11% on Thursday after reports of the interest from GE, but the firm said on Sunday night that its shares would remain suspended from trading on the Paris stock exchange until Wednesday.

The French firm has suffered from heavy debts and a fall in orders over the past decade, and was bailed out by the French government in 2004.

So, a struggling private French firm looks to be taken over by a more successful foreign one, and the French government sees fit to stick its beak in.  But to what end?

France’s economy minister has already said the government would block any deal it sees as unfit.

“We are working to improve the offers to make sure that French companies…do not become prey,” said Arnaud Montebourg, before Monday’s meeting.

Erm, fella.  Alstom already is prey: it’s struggling, and ripe for a takeover.  What you mean is “we want to make sure any potential buyer doesn’t make any changes that we don’t like.” Such as make the necessary changes to turn the company around.

“On the other hand we are open to alliances that help to equip us for globalisation.”

Right, but is GE interested in such “alliances”?  I suspect not; my gut feeling is they intend to buy Alstom and manage it however they see fit with the aim of turning a profit, and are not much interested in helping equip Frenchman for globalisation, whatever that means.

But Mr Montebourg has ruled out nationalising the firm if neither the Siemens nor GE offers go through.

No, you just want to interfere and veto any proposal you don’t like in the vain hope that a competitive and successful foreign company will plough capital into a politically sensitive French company without making any changes which will upset the management and workers.

Obviously Mr Montebourg hasn’t learned much from his previous experience of dealing with potential American buyers of French companies:

The head of US tyre manufacturer Titan International told the French government Wednesday that his firm will not take over a loss-making Goodyear factory because the unions there are “crazy” and its employees “only work three hours a day”.

“How stupid do you think we are?” Titan Chief Executive Maurice Taylor asked French Minister for Industrial Renewal Arnaud Montebourg

“I have visited that factory a couple of times. The French workforce gets paid high wages but only works for three hours.

“They get one hour for breaks and lunch, they talk for three and they work for three. I told this to the French union workers to their faces. They told me that’s the French way!”

Taylor was responding to a proposition by Montebourg to see if Titan, which makes tyres for agricultural vehicles, wanted to invest in the plant in Amiens, northern France.

Titan had approached Goodyear Dunlop Tyres France in 2012 to discuss a possible takeover, but negotiations were blocked by the Communist-backed CGT union.

Montebourg’s appeal to Taylor was a last-ditch attempt to woo Titan back and save the plant and its employees after Goodyear announced at the end of January that it was definitively closing the plant – which employs 1,173 workers – following a long struggle with the unions.

Poor sales at the plant resulted in a loss of 61 million euros in 2011, according to company figures.

Taylor warned Montebourg that despite his tougher stance toward EU trade protection, the French manufacturing sector was doomed if the government did not face up to the realities of Asian competition and deal more effectively with troublesome unions.

And sure enough, the Goodyear plant in Amiens is now on course for closure this year.  One would have thought that Mr Montebourg would this time around be standing well clear and allowing a foreign company to take over Alstom, but his meddling is likely to scare off any suitors.

Which is a shame, because the French make for extremely good engineers and technicians and there is probably an enormous residual value in Alstom in the form of personnel, products, and patents which GE could put to use without destroying the company or its presence in France completely (which is presumably why they wanted to buy it in the first place).  But should the actions of the French government and the unions prevent such a takeover, it increases the likelihood that the company will cease to exist altogether within a decade, as we’ve seen with the Goodyear factory.  And how does that help anyone in the long term?

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7 Responses to Où est la Thatcher française?

  1. TNA says:

    I think any CEO who is considering investing in a French industrial company needs to have his head examined.

    French industrial relations are a basket case at the best of times. Chuck in a national government which thinks that Gaulism was right wing and you’ve got a very uncertain destination to plough your shareholders’ investment.

    It would be interesting to know quite how much of the (bailed out once already) Alstrom’s revenue comes directly or indirectly from French government spending. If you absolutely wanted to invest in the company on your own terms, that would be the most important consideration; fire to many staff or trim the lunch break down to just two verres du vin and you could find M. Holland ripping your pipeline away by executive decision.

  2. Tim Newman says:

    @TNA,

    Quite. The sad part is that the majority of French are pretty decent workers and have considerable technical skills; they’re a pretty bright bunch, at least the ones I’ve seen. It’s the management which lets them down, but the same could probably be said of Britain (contrast the difference between the fortunes of foreign-owned car plants in Britain and our own shambolic factories). The main difference between the two is that Thatcher decided enough was enough and that the government was no longer going to keep supporting the status quo, hence the title of the post.

    I see some back home are doing their best to return to the glory days of the 1970s, though. This has led to the somewhat bizarre spectacle of The Guardian getting all misty-eyed in opposition to the takeover of…Big Pharma!

  3. bloke in Germany says:

    He wants Siemens to buy it because that will mean job cuts in Germany.

  4. Tim Newman says:

    He wants Siemens to buy it because that will mean job cuts in Germany.

    That’s a very good point.

  5. Richard Gadsden says:

    Siemens buying Alstom would be very interesting in high-speed rail. They’re pretty much the only European manufacturers of high-speed trains. Alstom also owns the old Fiat trains plant that makes the Pendolino (tilting) trains, so that would only leave Talgo (in Spain, whose only customer so far is RENFE) and Hitachi (just opening a plant in Newton Aycliffe, County Durham). While it would be theoretically possible to import from China or Japan, high-speed trains are really difficult things to transport (they’re very long – 200m or more – and require lots of specialised handling on ships, not something you can just stick in an ISO container) and those companies, other than Hitachi, would also have to build maintenance facilities in Europe.

    I could see Siemens-Alstom being forced to exclude either the TGV factories (in France) or the Pendolino factories (Alstom Ferroviaria in Italy) or both from the sale as anti-competitive in high-speed rail.

    Alstom and Siemens had a very competitive bidding war over the next-generation Eurostar (Siemens won) and a three-way bidding war between them and Hitachi has been expected for HS2’s two train models in the UK, so I can’t see the EU being happy with them ending under one roof.

  6. Tim Newman says:

    @ Richard,

    That’s really interesting, I hadn’t considered the train angle (knowing nothing about trains!). Thanks!

  7. Bloke in Germany says:

    @Richard, couldn’t you just drive a Chinese-made train to Europe (or vice-versa) on the trans-Siberian?

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