Date: Wed, 4 Jun 97 06:34:41 CDT
From: rich%pencil@UKCC.uky.edu (Rich Winkel)
Subject: French Elections Threaten Privatization Drive
/** labr.global: 416.0 **/
** Topic: French Elections Threaten Privatization Drive **
** Written 9:07 PM Jun 3, 1997 by labornews in cdp:labr.global **
From: Institute for Global Communications <firstname.lastname@example.org>
Subject: French Elections Threaten Privatization Drive
The Left wins. Suddenly, for several tens of thousands of workers,
Change your future is no longer just an election campaign
slogan but a short-term program—whether for the best or the
worse. France Telecom's flotation process is cancelled at the last
minute, or at least frozen. The employees of Renault Vilvoorde
[Belgium] find their fate is to be reconsidered. The incredible
soap-opera of Thomson's privatization suddenly comes to an end,
with a number of consequences for the fate of Dassault and
Aerospatiale. Air France's thorny file is reopened.
For the employees of all these companies, much is at stake in Sunday's vote. These companies are facing very tight schedules, and the new government's decisions will have to be almost immediate. Let us look at things closer.
On 5 May, [Socialist Party (PS) First Secretary] Lionel Jospin
promised to reconsider the closing-down of the Vilvoorde plant in the
event of the Left winning the general elections.
government's representatives on the management board would require
other measures to be contemplated, studied, and prepared, he
explained. If he becomes the head of the new parliamentary majority
next Sunday, Lionel Jospin will very quickly have to deal with this
case. Indeed, the European Group Committee (EGC) meeting will be held
on Tuesday, and the general meeting of Renault's shareholders will
take place on 10 June.
The Renault case will be the first test for the Left.
The state, which holds a 47-percent share in the company, can dismiss
the CEO or replace its representatives on the board, recalled
Daniel Richter, a CFDT [French Workers Confederation] representative
on the EGC. The Belgian trade unions are also hoping for a victory of
the French Left,
the only way to maintain the site operational,
according to FGTB [Belgian General Workers Federation] leader Karel
Gacoms. Last Monday, however, by voting (by an 86.7-percent majority)
in favor of negotiations on a redundancies plan, Renault
Vilvoorde's workers have helped toward a possible victory of the
Right—and hence the confirmation of the plant's closure on
The company's flotation was set to start on 5 June, with the
shares being offered to the public. Yesterday, speaking on Europe 1,
Lionel Jospin confirmed that the Socialists' position
is not to
privatize France Telecom. The PS' first secretary, who
recently mentioned the possibility of consulting the workforce on the
issue, explained that this consultation could only be
for making a decision, nothing more.
It will not be France
Telecom's personnel who will decide whether this major company
will be privatized or remain under government control, he said.
In the event of the Left winning, France Telecom boss Michel Bon will
He will go and explain to the government why flotation
is necessary, sources close to him explained.
It is not a
political issue for us, but a technical one. Whatever the result of
the vote, the only really important deadline is 1 January 1998 (date
of the liberalization of the telecommunications
sector—Liberation editor's note). We will then have to
compete on an equal footing with our foreign competitors. However, we
must take stock of the fact that all of the latter, with no
exceptions, have opened up their capital to private investors.
Michel Bon is convinced that a new majority would not call into
question his company's development (the operation planned by the
Right would raise between 30 and 50 billion French francs [Fr]). At
most, it would delay things for a few months. In fact, the debate on
France Telecom might well become word-play. Can we speak of
privatization when the Law on telecommunications (passed in
July 1996) requires the state to hold a 51-percent minimum share in
the company? The present majority and France Telecom's management
prefer to speak of
opening up the company's capital rather
privatization. A change in government would therefore
have the sole effect of returning to a more accurate terminology.
The Socialist leaders were saying so long before the dissolution of
parliament: If they were to win power, they would maintain this French
electronics group in the government sector. For Lionel Jospin,
privatizing a major player in the French defense electronics sector is
out of the question since the privatization of one section of the
military industry would pose a risk for national sovereignty. Over the
past few weeks, the Left has not changed its position. However, it is
those directly concerned by the issue who are astir, beginning with
the Thomson group itself (comprising a defense electronics subsidiary,
Thomson CSF, and a consumer electronics subsidiary, Thomson
Our status as a nationalized company is not very
favorable in international negotiations, a Thomson CSF manager
It is high time that we are allowed to develop fully,
and for the group to be inscribed within a genuine reorganization of
It is beyond doubt that a new left-wing government will stop the
process launched by [Prime Minister] Alain Juppe and will assert its
maintain state control over the defense industry. What
will happen, then? If we are to believe the PS leaders'
statements, the scheme proposed is the following: Initially, Thomson
CSF would remain an independent company with state
capital. Subsequently, the electronics group would join an
aeronautical group made up by Dassault (currently a partner of Alcatel
for the takeover of Thomson) and Aerospatiale, and whose capital would
still be mainly state-held. An Aerospatiale-Dassault merger is
therefore once again on the agenda. One problem remains: Serge
Dassault must be convinced to merge without being privatized —-
something to which the CEO is utterly opposed, and it is not easy to
imagine how he could be forced to change his mind.
Last Monday the shares of all the companies in question experienced a very significant drop in their value. It looks as if the markets no longer believe at all in Thomson's privatization. Dassault Aviation could not be traded throughout Monday, and it reopened yesterday morning 9.6 percentage points lower.
The Dassault Electronique shares, which were withdrawn from trading
throughout the morning, ended the session 6.9 percent lower, while
Thomson CSF shares lost 9.6 percent. The same penalty was suffered by
the candidates for the electronics group take-over. Lagardere shares
lost almost 6 percent of their value on Monday, while yesterday Noel
Forgeard, Matra's managing director, for the first time referred
to the crux of the matter.
If the Left wins power, we will try to
explain to the new government that it is essential to privatize
Thomson. Our agreements with the German group Dasa for satellites and
missiles are still standing and, on these important grounds, we would
be able to argue for the need to pursue the process already under
Lagardere, which has just lost a major ally following Alain Juppe's announced resignation (the prime minister had indicated his preference for Matra's offer in the first round of the group's privatization), is therefore now basing its strategy on the assumption of a change in the political scenario. The other candidate, Alcatel, which is Dassault's partner in this venture, suffered limited damage, experiencing a slight drop of 2.8 percent.
More specifically, the suspension of Thomson's privatization plans raises two immediate questions. The first concerns Thomson SA Chairman Marcel Roulet, who was appointed by the Juppe government to head the group—thus replacing Alain Gomez—for one specific purpose: privatization. If the project is shelved, Thomson's CEO, 64, will find himself in a more than embarrassing position. The same question mark hangs over Thomson Multimedia CEO Thierry Breton, who was also appointed by the government with the task of cleaning up TMM's accounts and finding buyers for the company.
On one side, Lionel Jospin, who is opposed in principle to privatizing
the aviation company: He sees no good reason for doing so and he has
already said an explained this to Air France's CEO. On the other
side, of course, [Air France CEO] Christian Blanc, for whom moving the
group into the private sector is now absolutely imperative. He is
making a personal issue out of this. Only last week, at the height of
the airline-pilot strike, Alain Juppe backed the CEO by stating to the
newspaper Les Echos that he would demand privatization
course of the year, if possible.
If the majority changes next week, Christian Blanc is determined to plea for privatization with the next government. First argument: In order to obtain the green light from the EU for the company's Fr20-billion recapitalization, the French state formally committed itself, in Brussels, to privatize Air France. Problem: No deadline was set. But, above all, the CEO will strive to prove that, faced with deregulation of the aerospace sector and international competition, Air France must place itself on an equal footing with its competitors. Furthermore, he will explain, for the umpteenth time, that only privatization can provide Air France's workforce with a viable plan and a meaningful future.
In short, Christian Blanc, who has not lost all hope of prevailing on this issue, will most probably try to strengthen his position by invoking PS Spokesman Francois Hollande statements, explaining that, as regards privatization, the companies operating in a competitive context—with the exception of the defense sector—will be examined on a case-by-case basis.