There are so many things going on in the French business and economy that I cannot do justice to them all.
If there is any general aspect of French business that interests you, please post a comment here and I will reply to it.
Since being divested by Total to its shareholders in 2004 at €27 the Arkema shareprice has increased by 85% and it is now nearing €50. Thierry Le Hénaff, the dynamic PDG (CEO) of Arkema, whom I recently heard on BFM business radio in Paris, seems to be revelling in his new found freedom.
The Arkema board meeting in Paris yesterday voted a share buyback program, but Le Hénaff states clearly that his strategy is one of investment, both in organic growth and in acquisitions. He will soon have divested about €400 million of non-core assets and this will allow him to muster a sum of about €800 million for acquisition of small, specialized companies that fit his three-pronged strategy (vinyls, industrial chemicals and products to improve performance) and help him to make the overall business less cyclical and produce higher margins.
Le Hénaff also intends to invest about €300 million annually to make the overall business more compeititive. Three percent of turnover will be invested annually in R&D, to strengthen the industrial capacity of Arkema based on its present resources and capabilities. At present only about 13% of Arkema's sales happen in Asia, so sales growth in that part of the world will be a priority for him.
As of today, Arkema has a turnover of €5.7 billion, has 80 plants throughout the world and employs about 17.000 people. To learn more you can read this morning's financial newspapers, Les Echos or La Tribune (which, by the way, just earned an award for being one of France's best newspapers, based on its combined print and web presence).
Will Orascom, the growing Egyptian mobile telephone operator, take over Bouygues Télécom, the third biggest operator in France? Bouygues Télécom provides most of the free cash flow available to its parent, Bouygues, the giant construction company.
Will Vallourec, the steel tubes manufacturer whose shares have increased by nearly 50% over the past couple of months, thanks to its involvement in the petroleum industry, be taken over by Arcelor-Mittal, by Gazprom or the Russian billionaire Roman Abramovitch? The President of Vallourec, Pierre Verluca, seems to have a "never say no" strategy while playing his cards close to his chest and saying that Vallourec can continue to function perfectly well as a standalone operator. He has said that Vallourec can also be a predator, with up to one billion euros available to purchase the company that provides the right fit.
According to the very interesting French trade magazine "Linéaires" the hypermarkets in the country are facing tough times. The two biggest hypermarkets in France are run by Auchan and Carrefour, Auchan at Vélizy a suburb just outside Paris and Carrefour at Antibes on the Côte d'Azur.
The Auchan Vélizy store saw sales drop by 2% and the Carrefour Antibes store saw sales drop by 1.7%. These decreases were larger than those of 2005.
Linéaires has established a league table of the top 100 hypermarkets in France. Out of the top 25, 17 saw a decrease in sales. If we look at the top 100 in more detail we see that Auchan owns 44 of them and Carrefour 43. Of the remaining 13, Leclerc (a group of independent operators who have one or more hypermarkets under the Leclerc Brande Name) has eight hypermarkets, and Cora (a regional operator in France, founded by the Belgian Louis Delhaize) has four. This leaves one to Géant-Casino near Marseille. To learn more you can check out the website below or contact us.
An article in the "Le Figaro Réussir" supplement this morning calls attention to the fact that instead of government-style business the new France will be encouraging business-style government. This is picking up on a trend that has been developing over the past 10 years. This government will no longer be a regime that tries to impose its will on the private sector through parachuting into state-owned businesses some very business-unsavvy graduates of the Ecole Nationale d'Administration (ENA). In fact the new government is one in which graduates of the ENA are nearly absent.
The new government put in place by Nicolas Sarkozy and François Fillon only counts two ministers who graduated from the ENA: Alain Juppé and Valérie Pecresse. Nicolas Sarkozy himself graduated from Nanterre University with a law degree. Nanterre was where the 1968 movement started. After that Nicolas Sarkozy spent a couple of years in Sciences Po (l'Institut d'Etudes Politiques, aka IEP) in Paris.
After 1945, the IEP/Sciences Po was downgraded to become a mere stepping stone to the ENA. The ENA graduates quickly used their networks to put in place a career-development path to take control of the French political system and place their own people at the head of the state-owned monopolies.
But if we go back to a time when graduates from the ancestor of Sciences Po had a major hand in government, 1870 to 1914, we can see that this was the period that finally put an end to the turmoil that had started with the French revolution in 1789. It was a time when France began to catch up with the other industrialised countries in Europe, and the ancestor of Sciences Po provided in its own right many civil servants to a deliberately low-deficit, free-market France that rejoiced in small government. At that time the French stock market was second only in size to the North American stock market.
Is the new business-style government and the new Sciences Po model a harbinger of good things to come in France?
The Universum French Graduate Survey shows that KPMG has jumped from 23rd position to 10th position among the employers which French Business Students (from the Ecoles de Commerce) would prefer to join when they graduate.
Two companies in the luxury industry come in 1st and 2nd place : LVMH and L'Oréal. Air France, which seems to be having a very successful merger with KLM, if its profits are anything to go by, is in 3rd place. Danone is in 4th place and Canal+, a French cable TV company is in 5th.
BNP Paribas is in 6th position and the next Bank is in 15th position, Socgen. The SocGen people must be wandering why their investment in external communications, which is not much lower than BNP's, is not paying off to the same extent.
You can find the full results (not only for France, but many other European countries) at :
Since last week the French universal bank Société Générale owns 6.91% of Valéo, the French automotive parts manufacturer. Valéo has recently been fighting off Pardus Capital Management, which wants it to change its strategy to unlock more value for shareholders. Pardus owns 15.08% of Valéo's capital. The big question now is who will Société Générale support in the next stage of the skirmish: the Valéo management team or Pardus?
UPDATE on Monday June 4 : SocGen says that this was a trading error. The bank is now back down to less than the 5% threshold of share ownership in Valéo.
In today's Le Monde (dated tomorrow) Mr. Lakshmi Mittal stated that since the "merger" with Arcelor debt has been brought down to 23-24 billion dollars at the end of the 2007 first quarter. This success has come as a result of the profits generated by the group and the synergy savings already realized, in the area of about 570 million dollars with an objective of realizing 1.8 billion dollars in synergies by 2008. The main objective is to maintain the group's financial rating.
Mr. Mittal, when asked about the possible acquisition of Vallourec, said that he did not comment on rumors. When asked if he was going to help his "friend" François Pinault who, it is rumored, is interested in the Vinci building construction group he said "How can I help him? I don't know what his projects are. We have not talked about Vinci."
Today's La Tribune financial newspaper is typical of all of today's papers inasmuch as it carries an article on the above subject. French consumer confidence has risen by 6 points since the presidential election. This is attributed to the fact that Nicolas Sarkozy's first actions in government will fulfill his promises to reinvigorate the economy through a series of tax breaks and labor market reform. He has already criticized the Finance Minister who seemed to be straying from what he had promised (for example that a certain percentage of mortgage payments would be deductible from income tax payments) and he has brought him back on track.
Many people are also expecting Sarkozy to make it easier to find a job in France. I remember last year assisting at a series of lectures in Paris given by Gary Becker, who won the Nobel Prize for Economics at the beginning of the 1990s for his work on Human Capital. The lectures were organised by the Institut Montaigne, a private French think tank sponsored by the Axa Insurance Company and the American University in Paris (which has just signed a deal to move to much bigger premises than the ones it presently occupies). Many French business people present at those lectures asked Becker how the French economy could be turned around. His very clear reply was "Labor Market Reform". It seems that that is what will now happen, but maybe not as quickly as Sarkozy would like. In the first instance he will negotiate with all the trades unions and the business representatives and it is only if he cannot get satisfaction through negotiations that he will bring the negotiations to a stop and introduce new legislation.
The upcoming elections for the French parliament are expected to give Sarkozy an overwhelming majority and thus he will have no problems in introducing new laws. However even supporters of Sarkozy's UMP political movement are worried that the majority would be too large. If the UMP deputies do not have a strong opposition to think about they will probably start fighting among themselves and, as in the previous Chirac/Villepin government, some measures favored by the executive may fail to be brought in because of internal UMP opposition.
It seems that Nicolas Sarkozy is being influenced by the thinking of Michel Camdessus, who headed up the IMF until a few years ago and is now in charge of Jacques Chirac's new foundation for sustainable development. Camdessus was asked by Chirac a couple of years ago to produce a report on what needed to be done to create more jobs. One of Camdessus's ideas was to create one single type of work contract, instead of the thirty or so contracts that exist at the moment. The direction of the "one contract" is the one that Sarkozy seems to be taking but French "particularism" will probably mean that a lot of exceptions to the suggestion of a universal contract will have to be taken into account.
The purpose of this blog is to talk about France as an economy and about French Business. My interests are very eclectic, ranging from French History through French Culture to an understanding of the French psyche.
There are other aspects of France, such as cooking and wine, which are very well treated in a range of other resources on the web and in different blogs so I will not go into them.
My everyday reading includes the newspapers Le Monde, Le Figaro, Les Echos and La Tribune. I am based in that part of Paris which is near the old Bourse and some of the most enjoyable moments of the day are when I meet up with friends who work in a large range of cultural and financial institutions in the area. In one direction, the National Library is only about 200 Yards from my office and the National Theatre (La Comédie Française) is about 500 yards away. In the other direction, and the cafés in which most of the stock market people take an early expresso begin not even 50 yards away. Many of these people strike up acquaintance in the cafés and so the debates that mingle culture and finance are far from rare.
If there are any aspects of the French Economy and Business World that you think would be interesting to a wide audience, please send me a request or a comment and I will do my best to give you a good answer.