Chapter I - The Apprenticeship
By Pierre Suard on Saturday 17 July 2010, 18:14 - Shot Down in mid-Flight - Permalink
Ton affaire, c’est de jouer correctement le personnage qui t’a été confié; quant à le choisir, c’est
l’affaire d’un autre.
(It’s your business to properly play out the character that you were assigned; as for choosing it, that’s the business of another.)
The only time I applied for a job during the 22 years that I would spend at the La Compagnie Générale d’Electricité (CGE) was when I applied for the one that brought me into the group in 1973.
At the time, after having spent ten years working in government service, I had been managing for about three years a small privately-owned consultant company employing about 50 persons. Our areas of specialty included economic research and the computer sciences. In September of 1973, Georges Pébereau, who at the time was chairman of CGE, recruited me to manage Sogelerg, one of the company’s engineering subsidiaries.
Sogelerg employed about 200 persons and existed in the protective shadow of its only direct shareholder, the Société Générale d’Entreprises (SGE), a construction and civil engineering subsidiary of CGE. Sogelerg’s major customer up until then had been its parent company. My first mission was to revive the company to liberate it from its dependence on its parent, and to expand into outside markets under its own name. Until then Sogelerg had been satisfied to take a minority participation in projects managed by its competitors, whether it was a feasibility study for the tunnel under the English Channel, a road construction project in Africa, or electrification projects in Asia or elsewhere.
At the time, because of the availability of international financing, infrastructure investments were on the upswing, especially in developing countries. From the beginning, therefore, Sogelerg was able to increase its work load, start producing profits, and regain its morale. The company’s situation improved steadily, as shown by the increase of its cash, a good indicator of the financial health of a consulting company (1 million French francs at the end of 1973, 14 million at the end of 1974, and 51 million in December 1975) and the number of orders booked during the year (49 million French francs in 1973; 95 million in 1974 and 112 million in 1975).
Because of these results CGE management offered me the position as chairman of another of its engineering companies—Sedim, a subsidiary in the telecommunications sector. Sedim specialised in construction and had only about a hundred employees. Its presence in the telecommunications sector may sound surprising, but there is an historical explanation.
In 1969 CGE had bought Alcatel (Alsacienne de Constructions Atomiques de Télécommunications et d’Electronique), which, under the leadership of Georges Besse, had, among other things, constructed a factory for isotope separation at Pierre-latte. After that project was finished, Georges Besse sought to use the team that had accomplished this industrial feat, so he created Sedim, of which he would serve as chairman. In fact, it was in replacing him as chairman that I came to know Georges Besse. He was underemployed at CIT, a flagship CGE telecommunications subsidiary not very inclined to make a place in its headquarters for the managers of companies it had acquired. At the time and in this field, companies were acquired primarily for their market share. The competencies of their staff were only secondary.
It was in that way that I got to know and to appreciate the intelligence, courage, common sense, and natural leadership capabilities of Georges Besse. His horrifying murder twelve years later in front of his home, to which he was returning alone and without protection after leaving his car, hit me all the harder inasmuch as we had just had dinner together a few days earlier. The absurdity of that death, the cruelty of the assassination, and the horror of several other murder attempts had a big impact on the general public at the time; but emotions calmed quickly after the murder attempts stopped, thanks to a strong response by the police and other security forces. When I observed, ten years later, the Evry criminal court being ironical about the risks undertaken by chairmen of industrial groups, it made the death of Georges Besse seem even more absurd.
Sedim turned out to be a rather dynamic company, very different from Sogelerg. It was run by Jean Swetchine, a remarkably competent and intelligent engineer with exceptional communication skills, and who was always surprising one with his original, warm, attentive but always effective human relations skills. Under him Sedim was able to develop a real expertise in hospital consulting. Sedim became a subsidiary of Sogelerg and progressively consolidated the company's construction expertise. However, when the possibility of a merger with Sogelerg was presented, I opposed it in order not to destroy Sedim’s vitality.
That period was marked by a painful event. In order to make a bid on a turnkey project to construct seven modern hospitals in Iran, Sedim joined with SGE. The negotiations were dragging on. Our local team decided to make presentations at the various sites of the solutions proposed by our consortium. A special flight was chartered to transport the two Sedim engineers, and an SGE engineer, as well as two customer representatives and two representatives of the customer's British consulting firm.
The plane disappeared in flight. It wasn’t found until two months later despite numerous aerial searches undertaken at our initiative. The plane had crashed on a mountain in southern Iran. Its remains had been pillaged.
The several human remains that were found, which were impossible to identify, were finally brought back to Paris by us and buried in the cemetery at Montparnasse, where a monument serves as a reminder of that accident.
All of this, as well as aid to the families of the deceased, was organised by Sedim’s general manager, whose sense of duty and personal contact was impressive. The other employers, as much affected as we were, manifested their sympathy simply by complying strictly with their contractual obligations to their employees. In such circumstances, human relations do not depend on the financial means of a company, but on the will and sensibility of a few.
The following year, 1975, marked the beginning of new phase. CGE asked me to run the group’s third industrial engineering company, Sogreah, an Alsthom subsidiary. Sogreah, successor to Laboratoire Grenoblois d’Hydraulique, employed 400 people and had over the preceding decades built up a solid reputation for its expertise in hydraulics, which was recognized internationally. However, its financial performance failed to reflect its reputation. It was for that reason that CGE decided to merge it with Sogelerg, a manoeuvre that was more delicate than for Sedim because Alsthom, Sogreah's parent company, had always been reluctant to accept the authority of CGE, and also because of the personalities of its chairman and its CEO.
I was unable to conclude the joining of the three engineering companies because in early 1976, summoned to a meeting by Georges Pébereau, I was informed that he and Ambroise Roux, the chairman of the group, had decided to name me CEO of Les Câbles de Lyon. It was impossible to refuse—to convince them to let me complete my unfinished task in the company which fascinated me and which was showing visible business and financial results. I pointed out my lack of industrial experience but it was in vain. The decision had been made. The sole concession was that I would continue running Sogelerg until the arrival of my replacement.
It was the same at Les Câbles de Lyon, where the existing CEO was to remain in place until September. That left me with a six-month reprieve which I spent mostly at Sogelerg. That was fine with me inasmuch as the few meetings that I attended at Les Câbles de Lyon distressed me and convinced me that if we were going to save this company, we would have to make a lot of changes. This would never be achieved with a bifurcated management. Nonetheless, that was and still is my understanding of a proper management structure. At any rate, I took advantage of this waiting period to meet and interview individually most of the managers of the company and to make my first visits to its factories.
I set up shop at Les Câbles de Lyon in September 1976 in the offices that the general management occupied in one of its factories in Clichy. It was a symbolic measure not to use the big office of my predecessor, which was turned into a meeting room, but to take instead a small corner office which had been given to me during the period of overlapping presidencies.
It took some time to come to understand the cable industry, to get to know the people in the company better, and to visit all of the ten or so manufacturing facilities. As I have indicated, I knew little about the industrial world—particularly, I must admit, the cable industry. Yet, cable products surround us and contribute significantly to our daily lives; and, notwithstanding the fact that they sometimes ruin the landscape, they are indispensable inasmuch as the transmission of electrical energy and the circulation of information are so much a part of life today. Before joining Les Câbles de Lyon my interest in the field was limited to the electric cord that lighted the lamp in my office and my razor, nothing to excite the imagination.
I was about to discover an industry that was very complex, using rational principles as well as skilled manpower, and involving countless products designed for the most varied uses and often very difficult to make. To transmit electrical energy, distribution lines are manufactured for positioning overhead or underground, as well as distribution networks and industrial cables to link together the innumerable devices that run on electricity. And then there are single conductors, buried in walls or hidden in tubing, to supply the electrical outlets of an apartment. I could also mention the cable (in fact, single conductor cables) which, submerged under the English Channel, link the French and English electrical networks, and weighing over 100 pounds a yard.
In the telecommunications field, fiber optics were still in the experimental stages in the laboratory. Cables used copper: The symmetrical pair, the simplest, to supply telephone service; coaxial cable (a linear conductor in the middle of a cylinder whose wall serves as a conductor) for transmission over great distances; and even very special cables, called “waveguides,” for very high frequencies. (A waveguide is nothing more than a peripheral conductor, a specialty of Les Câbles de Lyon licensed from the German Kabelmetal group, which serves, for example, to feed transmitting antennas for television or to collect information from the heart of a reactor during a nuclear test.) In certain cases, cables are required to resist very high pressure without losing their transmitting capabilities. Undersea telephone cables, for example, submerged several miles beneath the surface of the ocean, are subjected to several thousands of pounds of pressure per square inch.
But Les Câbles de Lyon, particularly through its subsidiary Filotex, also manufactured very specialized cables designed for airplanes, for electronics, and for various military applications.
The variation in products requires that the company be competent in many different techniques, such as metallurgy of non-ferrous metals (principally copper and aluminum and their alloys), the chemistry of plastics and insulation and, later, glass fabrication.
The manufacturing process itself involves several steps, the two principal ones being making the cable and the insulation of conductors. Making the cable is obviously the basic operation. It involves winding several different elements into interlaced spirals to make a product which itself is very flexible and can be rolled up. Unlike what takes place with a beam, when a cable is rolled with a wide enough radius in relation to the pitch of the cable, the several elements of which it is composed (being alternatively on the inside and the outside of the cable and therefore along circumferences more or less long) have to cover, on average, the same distance. The cable must also be able to be rolled without coming apart and without accumulating too much tension. Depending on the product involved, the single conductors, insulated conductors, and the cabled assemblies themselves are, one at a time, made into cable. To carry out these operations, it is necessary to have very precise machines, often very heavy ones, because the weight of the materials being processed can be enormous.
Les Câbles de Lyon thus had a very large sphere of activity. However, the industrial and commercial organization of the company did not function well enough to exploit it properly.
It should be pointed out that in 1976 Les Câbles de Lyon resulted from the merger in 1968 of three cable companies—Les Câbles de Lyon, the cable division of L’Alsacienne (the acquisition which brought Alcatel into the group) and Geoffroy-Delore. The reorganization necessary to eliminate the redundancies connected with these activities for the most part still remained to be done. Due to insufficient capital investments, the company's equipment was obsolete and unproductive. Its marketing organization lacked the drive necessary to be effective and the company's competitors had taken advantage of the problems created by the various acquisitions to gain market share.
With about 20 percent of the French market, Les Câbles de Lyon remained in first place in France (outdistancing the second by only a little) but held only the sixth place in Europe and twelfth in the world. Its position as leader in France left it with a moral obligation (I am told it was a requirement) to be conservative in its marketing in order not to disturb the company's competitors and to ensure their survival. The position of the company was thus gradually but continuously deteriorating. During the 1960’s Les Câbles de Lyon’s market share went from 24% to 12% and only gained ground because of the recent acquisitions. But the erosion continued
After several weeks of observation, site visits and discussions, the diagnosis and the treatment became evident. I must say that my task was greatly facilitated by Gilles Dupuy d’Angeac, my second-in-command. He had come from outside a year before me with an impressive industry background but had no experience in cables. Prior to my arrival he had been able to observe the company but, up until then, had not been able to get his analysis accepted. In the closed environment of the company it was not easy for a newcomer to gain acceptance.
I quickly saw in him an exceptional colleague—his taste for exhaustive analysis, his open-mindedness, his amiability and strong moral fiber couldn’t leave you indifferent or be left untapped. It was therefore with him that I initially developed the strategy for the group's recovery and thanks to his help and support, even in difficult times, that I was able to accomplish the mission that had been assigned to me by CGE. He’s aware of my gratitude and I’m happy to express it again here. It was together that we were able to carry out our adventure of building an international cable company, including making its first entry into the United States. He was given direct responsibility over the precision cable operations, while at the same time he collaborated with me on all strategic decisions.
In December 1976 we met with all the senior managers of the company to present the new strategy and action plan. The mission proposed was to regain the leadership position that Les Câbles de Lyon had held in the past. It was a natural objective because, as a result of the size that the company had acquired, a policy of pulling back would have been too painful and maintaining the status quo would have been impossible, considering how fragile the company's situation was. The company's unsatisfactory level of profits left it very vulnerable to a continuing decline in sales and pressure from its competitors. In addition, the weak cash flow wasn’t facilitating the financing of investments. With respect to technical aspects, the company was behind its competitors, whose patents were used for the new cables—for example, those of SAT or LTT for coaxial telecommunications cables and those of Silec for aluminium cables and plastic insulation.
To improve the company’s financial results, nothing original was proposed. It was necessary that fixed costs be reduced, even if by symbolic measures. It was also necessary to increase productivity—over the short term, by improved production planning, quality (manufacturing defects are costly in terms of waste) and our procurement policy, and over the medium term, by investing in modern machinery. With respect to the commercial aspects, we had to take back the initiative; our decisions had to be strictly dictated by our own interests. And with respect to exports, we needed to be a lot more dynamic.
The three courses of action which we had thus laid out would guide the policies implemented during the early years. Increased productivity necessitated reducing the workforce and these reductions were intensified as a result of our new capital investments. We had a long way to go. I remember my amazement at a meeting which took place around May or June of 1976 where I learned that, as in prior years, it would be necessary to send our habitual missionary, a veritable sergeant recruiter, to Morocco to hire new workers in order to prepare for the resignations expected from our foreign workers during the summer. Dumbfounded, I expressed my reservations, but I didn’t have the decision-making power. It seemed to me already obvious, however, that the weakness in our manufacturing organization resulted not from a lack of workers but from the lack of productivity of our outdated equipment. The outdated equipment also compromised quality and this problem was exacerbated by the lack of skill in our workforce. But it was difficult to improve the qualifications of our workforce because working conditions were often too repugnant for young qualified workers.
All of the factories needed to be modernized, except the one located in Gennevillier, the closing of which had been planned since construction of a new factory in Salles du Gardon for the manufacture of subscriber telephone cables. We therefore undertook construction of a new facility in the factory located in Bezons to take over the high frequency activities still at Gennevilliers and thus permit the closing of the Gennevilliers factory the following year. In Clichy Les Câbles de Lyon had two facilities—one that it had inherited from L’Alsacienne, which was going to be modernized completely, and another that it had inherited from Geoffroy-Delore, which would be closed.
To illustrate the actions undertaken to increase productivity by reducing manufacturing costs, it would be helpful to understand what we did at our rolling mill at Clichy.
The production of a cable begins with the fabrication of its conductor—in general terms, a copper wire, either solid or composite. A single strand wire is obtained by stretching a larger wire through a die, a process called wiredrawing. The process starts with a wire rod having a diameter of a little less than half an inch. There are two techniques for the fabrication of this wire. The more traditional of the two was the one used at Clichy where copper ingots, after being heated red hot in an oven, are “worked” on a rolling mill which, passage after passage, transforms them into wires. It is then necessary to solder the ends of the wires together to get the appropriate length. This is a very delicate operation requiring remarkable dexterity and physical force on the part of the worker. The point at which two wires are soldered remains a weak point in the material, which often results in breakage during subsequent wiredrawing operations. An attempt is made to reduce the breakage by slowing the wiredrawing process, but this of course reduces productivity.
The more modern process, for which Les Câble de Lyon had not been equipped, involved continuously pouring liquid copper from an oven where it had been melted onto a wheel with a groove of an appropriate size. The starting point is the copper cathode such as that which is obtained from electrolysis. This process avoids the use of ingots. The wheel is appropriately cooled and the resulting wire is rolled directly onto the delivery support, the capacity of which is the only limitation on the length of the wire. There are no intermediate soldered joints and the continuity of the process enables better control, resulting in a higher quality of wiredrawing.
The managers at the wiredrawing facilities preferred the wire product resulting from the latter described process which we had been purchasing from outside. We decided to equip the Clichy mill with a new oven which would assure higher and better controlled temperatures, thereby facilitating the lamination of the ingots and the soldering of the wires. The quality of the wire product was significantly improved and, as a result, productivity was enhanced further down the line. The company was able to reduce its purchases of the wire product, thus eliminating that added cost. This double gain would assure rapid recovery of our investment.
Everyone was in agreement on the need to make productivity investments. But it was necessary to finance them. Insufficient cash flow made it necessary to go to the parent company for help. However, the parent company, greatly disappointed by recurring losses from the cable business, which previously had been the gem of the group, would prove difficult to persuade. I decided to take the bull by the horns and to prepare a two or three year plan which would bring the company at least to the level of its French competitors. All the restructuring programs had to be included, at least for the first three years.< The plan was supported by economic justifications.
Without minimizing the problems and risks and with a certain amount of solemnity, I presented the plan to Ambroise Roux and Georges Pébereau. In view of the urgency, they met with me at a special meeting outside the regular budgetary process. The plan involved 500 million francs, whereas annual investments were barely more than 60 to 70 million francs. To demonstrate my confidence, or perhaps as a challenge or simply a tactic, I indicated that the company was not asking for additional equity capital inasmuch as the indebtedness we would incur would be rapidly repaid as soon as the new investments were put into service. I obtained their agreement subject to my promise to report regularly regarding developments.
The most spectacular project was the construction of a new plant which would permit us to close the oldest factory in Clichy, which in our jargon was called “Clichy D.” The Clichy factory seemed like a relic from the 19th century—everything was outdated, dirty, dusty, even the management offices, with their woodwork, windows and reception windows much like what one could imagine being used by employees with monocles and telegraphists in hoop-skirts. Moreover, Clichy D manufactured residential cables, the simplest type, with little value added, subject to enormous competition (especially from imports), and on which the company continuously lost money.
The easiest solution, widely advocated, was to close the facility and get out of this product line. Before accepting that solution we investigated whether a radically new and highly productive manufacturing process could render this line of business profitable. In fact, in comparison with imports, high labor costs in France, due to the low labor content in the products, could be compensated by lower transportation costs, an important factor to consider when dealing with relatively heavy products. With respect to our national competition, we thought that a highly productive investment would have a dissuasive effect and, in any case, could not be made by many of our competitors.
It was necessary therefore to imagine a radically new manufacturing process. The plant manager, Marius Larguier, and his small but knowledgeable staff, working with outside equipment manufacturers, were able to put together new manufacturing processes in key areas. Test trials worked so rapidly and to their complete satisfaction that in two years a completely new factory at Autun would symbolise the rebirth of Les Câbles de Lyon. For the first time, a cable manufacturing facility assembled its PVC in an automated plant. The insulation manufacturing lines, in tandem with the wiredrawing lines, were manufacturing insulated conductors at great speed (up to 6,000 feet a minute).
The insulated wires were assembled by a new process called S-Z which consists of winding a bundle of conductors in one direction, and then in the other, but with no average tension overall, which required no more cabling machines with huge turning masses. A new reticulation process (polymerisation by submersion in a bath of hot water) was also implemented for the fabrication of protective jackets. The process was completed by a highly automated process for cutting, packaging and computerized storage.
The factory fully met its objective. With less than 140 people, compared with more than 400 at Clichy D, it reduced manufacturing costs to such a degree that Les Câbles de Lyon was able to start making profits again in this product line, to gain a greater market share from its French competitors, and to limit competition from imports. Twenty years later this factory remains the central manufacturing and distribution facility for this product line, but on a scale covering Western Europe.
Naturally, this factory received a lot of visitors. In 1982 I made it a point to show it to Ambroise Roux, who had authorized the project by approving the 1977 investment plan. Ambroise Roux was no longer chairman in 1982 and thus no longer influential. CGE, now nationalized, didn’t much appreciate former capitalist figureheads. He accepted my invitation and it was the first time that I spent a full day with my former chairman. Clearly, he was not at ease in the factory but he appreciated the gesture and the welcome that he received.
I renewed my invitation a few months later for a visit to the Kabelmetal facilities in Germany. He was left with fond memories of those visits, as was I, even when our relations became difficult.
The modernization of industrial equipment and the increase in productivity would result in staff reductions. At the end of 1975 the company employed 7,460 people and at the end of 1976, 7,522. Later, staffing would decrease at an average of 500 employees a year and stabilize at around 4,500 for a production level that had increased by 30 to 40 %. I won't go into the numerous episodes that this program evoked with respect to our human resources situation. I was, of course, the target of labor organizations which designated me as a bandit of industry and a creator of industrial wastelands.
At the plant in Lyon we demolished, among other things, an old shop facing our principal entryway. Inasmuch as we didn’t have any other use for it, and in order to open up and improve the industrial environment, the empty space was turned into a lawn, properly maintained. The union representatives told me they called the area “Suard Square.” I took it as a compliment because, in the end, the terrible human resources transformation that we had undergone—for which I received heated criticism and which I was duty-bound to carry out without underestimating the traumatism that we created in the families of those who had lost their jobs—resulted rather quickly in a tangible improvement of the situation. Jobs disappeared, but others for more qualified workers were created. At Autun all the factory workers had technical degrees and as they passed through the hallways of Autun, well-lit, brightly painted, perfectly clean and, all things considered, quiet, they remembered the deplorable working conditions at Clichy D. One by one our competitors had their difficulties and laid off employees and sometimes closed down or were acquired.
Reassured by our newly reconstituted strength, we were going to profit from this transformation of our company and to expand upon it. We embarked on a policy of regular acquisitions which, in 15 years, would make Les Câbles de Lyon the undisputed world leader in the industry.
The first significant step was the acquisition in 1979 of Les Laminoirs Tréfileries Câbleries de Lens (“Lens”), controlled at the time by the Suez group. This company interested us in particular because of its two continuous casting facilities, one copper and the other aluminum, operated by its affiliate La Société Lensoise du Cuivre and because of its experience with overhead lines, areas where Les Câbles de Lyon was absent. But its activity in metallurgy of non-ferrous metals presented a problem for Raymond Pelletier, former chairman of Les Câbles de Lyon and at the time second-in-command at CGE. He reminded me of the commitment made over 20 years earlier with the Pechiney group to stay out of the metallurgy business. I noted that this non-competition obligation had been taken for a 20-year period and that Les Câbles de Lyon was, therefore, no longer legally held by it. Yes, he responded, but morally the commitment would last forever. We were finally able to overcome his misgivings, which perhaps did honor to the man who expressed them and reflected at the same time a period when competition was controlled, but which no longer corresponded with current business practices.
In this way Les Câbles de Lyon entered the field of fabrication by continuous casting. Seven years later, with the acquisition of Thomson Cuivre and of the second copper continuous casting facility in France, Les Câbles de Lyon became the sole French producer.
The growth of Les Câbles de Lyon in France is illustrated by the history of Girm. The Girm (Groupement d’Importation et de Répartition des Matières premières) was, as its name suggests, a war-time holdover. Its mission was to assure, in case of crisis, a continual supply of strategic materials to the country's industries. In exchange for certain tax benefits, the entity had to maintain and finance, in particular, a certain amount of copper. Its capital was divided among various industrial operators in proportion to their consumption. In the beginning Les Câbles de Lyon was one of the many stockholders of Girm, holding a modest number of shares. After having bought out a number of French cable companies, especially Lens, the share of Les Câbles de Lyon in the capital of Girm increased until it took control and then acquired 100%. Girm would become, 12 years later, a wholly owned subsidiary of the Les Câbles de Lyon group.
As it happened, we entered into relations with various mining groups which produced copper and, in particular, the Chilean group Codelco, our minority partner in La Société Lensoise du Cuivre. In 1982, at the pressing invitation of our Chilean suppliers, I went to visit their mine in Chuquicamata, the largest open air mine in the world, and their impressive mineral treatment facilities in the desert in the north of Chile at an altitude of more than 6,500 feet. At the time of my visit to Santiago France's ambassador organized a dinner to which he invited a group of about ten people. During the meal the conversation touched on the political situation. At that time General Pinochet had been running the country effectively for several years. I was struck by the peace and prosperity—on the surface at least—of Santiago and said so, having read during the flight over in Le Monde an article about violent demonstrations in the Chilean capital, which was described as being nearly in a state of siege. The ambassador said there hadn’t been any recent trouble in Santiago.
I related that article to another that I had read seven years earlier in the same newspaper where the journalist described the popular jubilation which had welcomed the communist troops when Phnom Penh was taken. I had visited Bangkok at that time where I had seen a long line of several hundreds of Cambodians who had been able to flee that “popular jubilation” and who had gathered in front of the French embassy in the hope of obtaining a visa. So many examples of the objectivity of our great news reporting!
We also talked of the situation in France where the government was facing a serious crisis with the truck drivers, a problem which was of particular interest here where everyone remembered that it was a strike of truck drivers that had led to President Allende's downfall. Then the ambassador talked about the responsibility of company heads in social crises, who, in his opinion, live cut off and isolated from the lower classes with which they were unfamiliar. According to him this is not good. Different social classes should interrelate. He, for example, lives in Paris in an apartment building and when he receives guests at the house, it’s his wife who serves the meal to their guests. I listened, surprised, weary of this “champagne-socialist” type sermon; and then I interrupted: “Well, at my house, my wife not only serves the meals, she prepares them as well.” The incident would not go unnoticed. Many years later a person who had been at the dinner reminded me of it.
The acquisition of Les Câbleries de Lens marked a turning point in the history of Les Câbles de Lyon. Les Câbleries de Lens enlarged its traditional sphere of activity, but especially in presented Les Câbles de Lyon with a company with a long history, very structured, with a strong culture, equipped with an efficient network of sales representatives and warehouses, and accustomed to living on the edge of traditional professionalism. This was the occasion to perfect and test our method of integrating new acquisitions—to respect their culture and people but at the same time, in a balanced way, to take advantage of the synergies available, recognizing objectively and without bias the better choice in each case; to pool know-how and centralize purchasing on an international scale. It was also our first opportunity to rationalize production between two companies—similar types of cables were packaged and distributed under the trademarks of each of the companies. In that way we were able to operate without losing each company’s share of the market.
The following year saw a new attempt to make an acquisition in France. The Gorse companies, founded in 1947 by Maurice Gorse and still, at the time, well managed by their founder, had a good position in specialty cables and their sales to engineering companies. The negotiations lasted a long time and were only concluded in 1983. Les Câbles de Lyon acquired the Gorse entities, including their subsidiary Câblerie Française, which employed 640 people and had 400 million francs in sales. Maurice Gorse, wanting to retire, left the company; but all his loyal colleagues stayed on, including his brother, sons and friends; and the Gorse entities, under the leadership of Ronald Mattatia, continued to prosper in the Les Câbles de Lyon group and, particularly, to earn the best profits in the business (from 4 to 6% of sales).
Several other cable companies of lesser importance were also bought during this period. In 1981 we considered the acquisition of a leading competitor, Silec, which was listed on the stock market and better positioned than Les Câbles de Lyon in high tension cables insulated with plastic. I got the approval of CGE to act should the need arise, even by making a hostile takeover bid. But the nationalization of CGE was announced and I abandoned the project, not wanting to impose on that dynamic company the uncertainties of the public sector. It was because of that that Silec kept its independence. It would subsequently be acquired by another competitor.
But we were also thinking of expanding beyond France. Les Câbles de Lyon didn’t have any foreign subsidiaries, except for a tiny company in Spain, which was continually experiencing losses and was due to be shut down. On the other hand, it was a minority shareholder in two companies—Liban Câbles (in Lebanon) and CGE Maroc (in Morocco), a subsidiary of CGE, with manufacturing activities in cables and other products. These two companies benefited from the technical assistance of Les Câbles de Lyon; however, not being controlled by it, they had their own commercial policies, which sometimes created conflicts with respect to exports.
Liban Câbles deserves special mention. Its factory was located in the Christian section of Lebanon while its offices were located in the Muslim section of Beirut. It survived 20 years of civil war with practically no damage. Not a day of production had ever been lost. When there was an electrical outage, the company’s generator kicked in. When the Beirut harbor was inaccessible, raw materials arrived by way of Djournieh. Cables were shipped out by truck, even to Syria and Iraq, and often were paid for in cash at the footsteps of the customer's factory. We owed this miracle to two Lebanese managers, Ghassan Boulbol and Antoine Chami, both educated in France—one at Supelec and the other at HEC. Before these latest developments the Supelec engineer was responsible for the factory while the HEC graduate was responsible for marketing at the company's headquarters. During the civil war they exchanged their functions because the HEC graduate, a Christian, couldn’t go to work any more at the offices in Beirut; and the Sunni engineer had to avoid the Christian areas. But both excelled in their new functions like old hands.
I admired each one’s ability to keep his head. One day I called Ghassan Boulbol in Beirut to hear the latest developments because there had been several days of intense combat in the capital. I found him at the office. “All is fine,” he told me. “Things are quiet again; the factory is running. Nobody was harmed.” Because I insisted on more details, he told me that a shell had entered the offices but that it hadn’t exploded—therefore, all was fine. Some time later Antoine Chami was the victim of an attack. While returning to his home, his car was hit by two barrages of automatic weapons fire, one from the front, the other from the side. His windshield was hit, as well as the side door in several places. He, however, suffered only minor injuries in his foot from a bullet that had ricocheted. I took a trip to the company a few days later. Since he was still hospitalised, I went to see him on my way from the factory to Beirut at the Djournieh Hospital where he was being treated. That visit will stay in my memory a long time.
He was in a room on the top floor of the hospital. Armed militiamen guarded the entryways from the anteroom. Regardless, I found him as cheerful as ever, surrounded by his family and grateful to the Blessed Mary for having protected him. His expression of faith, in the light of the evening sunset, at the foot of Mount Lebanon and Our Lady of Lebanon Church, was impressive. He then told me not to delay—that it would be better to cross the demarcation line before nightfall. Later we learned of the reason for the attack—it was vengeance by the family of an employee who had been let go.
The situation in Lebanon will remain complicated, even if one tries to approach it "with simple ideas." It’s a country which should be close to the hearts of the French because, in the huge and highly populated Middle East, it’s one of the rare countries where France is still liked, despite numerous disappointments throughout history.
The first entry into the United States by Les Câbles de Lyon, as symbolic as it was, illustrates the atmosphere that reigned at CGE in 1976. The CIT representative in the United States was in contact with Frank Drendel, a director of Superior Cables. Drendel wanted to buy the division that he managed, which focused on television cables. He offered Les Câbles de Lyon ten percent of the capital of his new company, Comm/Scope, for $250,000. CIT had left his proposal unanswered for several months when Georges Pébereau proposed, in July, that I look at it. It was for that reason that Gilles Dupuy d’Angeac and I left for North Carolina, by way of Washington, which was serviced at that time by the Concord. It was our first supersonic flight.
After a long discussion to understand the objectives, the means and the market, the proposal seemed viable and we concluded the agreement subject to approval of the board of directors—in fact, the approval of Raymond Pelletier, chairman of Les Câbles de Lyon. On my return, I promptly went to work to obtain it. After several tries, from his vacation home in Chamonix, France, he agreed to give me his backing for our plan to buy this “lottery ticket.” The formula was a success. In fact, it was a winning ticket. But especially, we had met Frank Drendel, an entrepreneur very characteristic of the new United States, familiar with the world of cables and telecommunications, who would help us and advise us in our subsequent endeavours.
The experience with this “lottery ticket” was edifying. Les Câbles de Lyon had subscribed to 62,500 shares in Comm/Scope on August 6, 1976 for $250,000 (1,231,000 francs). In 1978 Comm/Scope was acquired by Valtec, a company listed on the stock exchange (one share for three). Les Câbles de Lyon received 185,500 shares of Valtec and sold 4,000, realising a capital gain of 1,369,000 francs, thereby recuperating its initial investment. More stock was sold later. The profits from the sale were reinvested in a venture capital fund which had two interests for us: First, to familiarize us with the operation of these high risk funds investing in small high tech companies, a practice which did not exist in Europe at the time; and second, to familiarize us with numerous investment plans in a field which could be of interest to us.
In 1980 Valtec was acquired by Macom (one Valtec share for two Macom). Les Câbles de Lyon was then left with 286,578 shares of Macom. Little by little Les Câbles de Lyon subsequently sold most of its Macom shares, using the profits to make certain other investments. By February 1984, Les Câbles de Lyon had sold its shares bought in these other investments and still had 23,578 Macom shares (with a stock market value of 4 million French francs) as well as shares in the venture capital fund (valued at 15 million francs). Since the purchase of our “lottery ticket,” the capital gains realized after the initial investment were 68,629,000 francs. So the original 1.23 million franc investment grew in six years to 89 million francs. It was definitely a winning ticket.
During the same time period, in 1978, we acquired Chester Cables, a New York manufacturer of specialty cables with sales of $22 million and 450 employees. We were seeking to establish ourselves in the manufacture of specialty cables, some to be used in oil exploration, others in aeronautics.
In France our subsidiary Filotex was the principal supplier of Aerospatiale and Dassault Aviation. Filotex wanted to qualify as a supplier to Boeing, which would have been possible from France; but their Seattle-based buyers told us clearly that they would not deal with us if we didn’t have a manufacturing facility in the United States. This took me by surprise because I was already familiar with American concepts of free enterprise. Nevertheless, we constructed a special workshop in Chester to produce aeronautical cables. With respect to its technology, this new equipment stood out from the rest of the factory. It was the first time (though we would experience the same thing on many other occasions) that we were surprised by the old equipment, rudimentary working conditions, and generally antiquated state of an American factory, frankly behind in comparison with European factories.
There was another development in April of 1985. Chester (having become Chester Cablewave after its merger with Kabelmetal’s American subsidiary) acquired all the shares of the cable company Celwave Technologies, Inc. of Clarement, which brought us back to North Carolina, near Comm/Scope. Celwave Technologies was one of the leading producers of copper telephone cable, as well as a leader in the antenna market and in passive components used in the cellular telephone industry. That acquisition brought to our American subsidiary five manufacturing facilities located in Kentucky, Arkansas, New Jersey, Arizona and North Carolina, which were added to those located in New York and Connecticut. The American subsidiary resulting from that merger was named Celwave Systems and had its headquarters in Hickory, North Carolina. It employed 1,100 people and had sales of $140 million. The antenna and high frequency cable businesses would experience intense activity with the rapid expansion of the cellular telephone industry.
In eight years Les Câbles de Lyon, which dared in 1976 to buy the famous lottery ticket and thus make its first entry into the United States, had a subsidiary with a presence in eight states. This subsidiary was by far the largest North American subsidiary of CGE, and was a profit-making entity, another remarkable accomplishment. The same thing would happen in Europe.
In 1979 Les Câbles de Lyon first acquired a relatively modern Greek cable company with 300 employees, a factory at Volos and a headquarters at Piraeus. It had been created by a likeable ship owner, friendly, classy, and francophile, but who for business matters was influenced less by personal inclination than by pressure from the government, which expected the shipping industry (the principal financial group in Greece—but in fact offshore because of certain benefits received) also to contribute to the development of the domestic economy. Ten years later the company would be merged with Manuli Helas, the Greek subsidiary of the Italian group Manuli, which Alcatel Cable would buy, making it the largest cable company in Greece.
We tried to establish ourselves in Asia as well. Korea presented an opportunity. The government relaxed its protectionism by offering foreign companies the possibility of investing in small businesses, on the condition that they brought new technologies with them. We negotiated for several years with a cable company there, proposing to transfer to it our know-how in fiber optic cables. After long discussions with the partner and the government, we concluded that the opportunity wasn’t real (at least with respect to the cable industry) and that Korea continued to give exclusive rights in the Korean market to national manufacturers. We finally obtained the right to invest on condition that we not transfer the fiber optic technology, but to limit ourselves to export sales. The project was abandoned. However, Alcatel Cable would acquire the company 20 years later.
In the early 1980’s Les Câbles de Lyon was well aware that its development from that point forward would have to be in the international area, since the company's acquisition policy in France had been carried out successfully. However, the number of foreign takeover targets was limited because the market was dominated by big name companies—BICC in Great Britain, AEG and Siemens in Germany, Phillips in Holland, and Pirelli and CEAT in Italy—which for the most part had a strong international presence. We quickly focused on Kabelmetal, a German cable company that we had been familiar with for a long time inasmuch as we were its licensee for high frequency cables. I therefore requested a meeting with Dr. Siegfried Schiffbauer, Chairman of the Board, who represented the sole shareholder, GHH (Gutehoffnungshutte). I went to see him at his office in Osnabrück in the Ruhr, to discuss with him the advantages that I saw in a union between Kabelmetal and Les Câbles de Lyon. At the time it wasn’t necessary to have an investment banker or other intermediary to make an acquisition.
The reception was positive. Since his concept of how to operate a business corresponded with ours, we readily agreed that there should be a single shareholder and management. Inasmuch as GHH favored its activities in traditional metallurgy, it accepted rather easily to give up the fabrication of insulated cables. Kabelmetal AG transferred its cable activity to a subsidiary called Kabelmetal Electro and retained its other activities. Subsequently, the normal process of mutual visits to each other's facilities took place rapidly. This gave us a chance to evaluate the capabilities of Kabelmetal's management. Financial negotiations followed, with the active participation of the shareholders on both sides—GHH and CGE—and concluded in Berlin without difficulty.
Nonetheless, we would run into a number of difficulties before this acquisition would be completed. At one time CGE pushed me to seek an agreement with AEG, but that group would not agree to withdraw completely from the cable business. We did not pursue that avenue further, for the time being at least. (The reader will see how, ten years later, Alcatel Cable succeeded in taking over AGE's cable operations.)
The real difficulty which put into peril our acquisition of Kabelmetal came after the 1981 political changes in France which led to a proposed law to nationalize a number of companies over which the state wanted to take control, including CGE. GHH hesitated to sell its subsidiary to the French government, particularly since the proposal anticipated that it would retain a minority share in Les Câbles de Lyon during a transitional period. It would take a lot of discussions, efforts and promises, including on the part of the French government during the period when the nationalization law was under discussion by the National Assembly (and where the acquisition of Kabelmetal was explicitly used as an example), to convince our German partner that, even as a subsidiary of a nationalized parent company, Les Câbles de Lyon would under the law remain a private company and would continue to be managed as one. We were finally able to sign the agreement in Geneva, without modification, on July 12, 1982.
In exchange for its contribution of Kabelmetal Electro stock to Les Câbles de Lyon, Kabelmetal AG (of the GHH group) received 61 million deutsche marks from Les Câbles de Lyon and 25% of Les Câbles de Lyon’s stock. The group resulting from this transaction became the second largest cable company in the world, with sales of 7 billion French francs. The press responded favorably to the agreement by positive headlines such as “Success for CGE,” “Les Câbles de Lyon, Second in the World in its Field,” “Les Câbles de Lyon, a company of international stature,” and “Birth of an Important European Cable Company.”
As had been the case in the French market with respect to the acquisition of Câbleries de Lens three years earlier, the Kabelmetal transaction presented the opportunity to enlarge our knowledge and experience in acquisitions. But the stakes involved here were of another dimension. It was necessary this time to marry the cultures and traditions of two companies of practically equivalent size, and this notwithstanding the language barrier. We applied the same principles and relied on the same managers. Gilles Dupuy d’Angeac and I joined the supervisory board; in fact, we participated in a number of meetings of the “Vorstand” (board of directors) during the early months.
It was necessary that Kabelmetal quickly become profitable again, and, therefore, that its productivity be improved. In fact, its capital equipment was rather modern but used by too many people with structures far too cumbersome. It took a lot of time and talking to convince the management that the costs and staffing numbers could be reduced. Then, we were able to see, for the first time, how the cohabitation system in Germany functioned in a time of crisis. The supervisory board had an equal number of representatives from the shareholders and the employees or unions. In the event of a tie, the chairman had the tie-breaking vote but only after the second deliberation, which, in fact, immediately followed the first. Overall, the system seemed to me less conflictual (even later at SEL, where relations were a lot more tense) than the system that we were familiar with in France, which has since become even more complicated.
Kabelmetal offered a lot. Aside from the experience of managing a large foreign subsidiary, it brought us solid positioning in technology, particularly in the high frequency area, not only in Germany but also with a prosperous subsidiary in the U.S. and another smaller but very profitable subsidiary in Brazil. For the first time we created, under the leadership of Dr Jürgen Lühring, a group of products, the “Radio Frequency Group,” (RFS) of world-class competence. Twenty years later that structure would continue and Alcatel would remain in first place in that market. Kabelmetal also had a subsidiary in Nigeria and another one in Indonesia.
That was also the first time we organized management meetings on an international basis. The first was held in September 1982 at Arc-et-Senans. The rationale and utopia of this site of an 18th century salt marsh would help us clarify our ideas and our organizational principles. The wine from Arbois would help establish unity, which turned out to be friendly and profound for the management team.
The second meeting would be held in October 1984 in West Berlin with the same ambience of hard work and genuine camaraderie. But the surroundings left an impression on many of us, especially our brief visit to East Berlin with the meticulous control of its border. Our vehicle and all its passengers were trapped for a good quarter of an hour in an area completely surrounded by high wire fences. The vopo scrutinized our passports, searched the vehicle and even slid a mirror under it to assure themselves that there was no one hidden. Later, the discovery of a dreary, poor and sluggish city where the scars of the last world war were still visible would strike us, as the contrast was so great with the liveliness, opulence and brightness of West Berlin. How could our foreign colleagues understand that there were, at that very time, communist ministers serving in the French government in Paris? The following evening, during a friendly dinner in a traditional tavern, I sensed nevertheless a certain uneasiness. We were right next to the prison at Spandau where Rudolf Hesse was still serving the sentence given him at Nuremberg almost forty years before. Relations between France and Germany had become very friendly, too friendly perhaps to survive the renewal of the generation that had experienced the war. The kind of links that Les Câbles de Lyon had just created, if expanded, could certainly contribute to perpetuating the quality of those relations. It was, I admit, an element of satisfaction which added to the pleasure of seeing how rapidly the management teams of Kabelmetal and Les Câbles de Lyon undertook to work together with such enthusiasm.
Meanwhile, in Paris there were still several hindrances. With respect to union activity, a new argument arose in opposition to corporate restructuring: Why improve productivity and reduce jobs in France if it is only to obtain the means to buy foreign companies? In Germany we had heard a similar criticism: “You’re acquiring companies here to transfer work to France in order to preserve jobs for your employees.” In Paris the newly designated Minister of Industry, Jean-Pierre Chevènement, asked to attend two Central Employee Committee (CEC) meetings in the nationalized sector, at which the company’s strategic plans were to be debated—one of CGE and the other of the Thomson group. I took advantage of the opportunity and volunteered to receive the minister.
That day, November 10, 1982, our CEC meeting, which alternated between Lyon and Clichy, was held in the Clichy factory. The minister was awaited by a delegation with a banner protesting the layoffs. I greeted him at the entry with the factory's manager. We passed without difficulty before the small group of demonstrators and entered the meeting room on the ground floor of the general management offices. All of the CEC members, as well as members of management who attended these meetings, were already at their places—about 40 people in all. The minister sat down to my right and we were surrounded by four managers. I opened the meeting well aware that for the majority of the employee representatives I was going to be put to the test; and, from the malicious looks of some, I sensed that they were preparing to count points in the battle that they were hoping for. After opening remarks, I underlined the unusual nature of this meeting and indicated to the minister that, despite his presence and in accordance with his wishes, we would conduct our meeting in the usual manner. The first item on the agenda concerned company strategy.
I discussed the company’s activities using for illustration the numerous samples of cables that I had arranged to have in the room. The multiplicity of the products and the fields in which Les Câbles de Lyon operated had to be eye opening and impressive. I then explained that the market, up to that time very national, was without doubt going to become more and more international. As a result, it was necessary to constantly improve the company’s competitiveness in order to resist the competition, which would only intensify. That would be achieved by increases in productivity, the current pace of which was well above the rate of development of the market, which explained the need for job reductions. Moreover, internationalisation of the market required us to develop a sufficient size because even though Les Câbles de Lyon was a leader in France, it was not big enough on an international scale. That was the reason for the acquisition of Kabelmetal. The minister listened without interrupting my presentation of Les Câbles de Lyon’s approach, which I made without conceding and, I believe, without surprising the CEC members who had often heard me develop these themes.
When I had finished and before opening the floor to discussion, I asked the minister if he had any comments. We then had the pleasure of hearing the presentation of a real statesman. Addressing the members of the CEC, he told them that he agreed wholeheartedly with the objectives and policies of their chairman. French businesses must be productive to be strong. They must adapt to the exigencies of the market. They must shine and develop internationally. It’s a national obligation for all and especially for those in the public sector. He concluded by asking Les Câbles de Lyon to continue pursuing, and even to accelerate, our policies and assured us that we could count on the government’s support in that regard. Then he quickly added: “I have to attend a session at the National Assembly and must, therefore, although with regret, leave your meeting now.” Then, without hesitation, he stood up. No less surprised than the other participants, I stood up as well to accompany him. As we passed the meeting tables on our way out, I heard the sounds of a lot of disappointed delegates, including one who quipped, “Damn it! Next time we won’t vote for you.” It takes a lot of character in a democracy to maintain courageous stands. It is a distinctive feature and is the greatness of true statesmen, qualities that are in the process of disappearing.
When I returned to the meeting room the conversation had picked up steam. The discussions regarding our strategy were difficult. However, reinforced by the minister’s blessing, it was easy to conduct and conclude the meeting. I think this CEC meeting left a clear impression, whether of hope or disappointment (but certainly not banality), in the memories of each of us who attended.
Even though, technically speaking, Les Câbles de Lyon had not been nationalized, being a subsidiary of a nationalized company carried with it a lot of disadvantages, the most immediate being primarily psychological. Then, the “Auroux law,” the law concerning the “democratisation” of the public sector and the new rights given to the labor unions, stirred up a lot of hopes but also carried the seeds of contradiction and disappointment. The labor unions (and I can’t hold it against them) hoped that the nationalization of the group would accord the employees a status similar to that previously held by employees of nationalized companies, at least the guarantee of continued employment. Restructuring became more delicate as a result. Ministers’ offices intervened and then their actions would be pursued by CGE, whose new head of personnel was a senior official of the employment ministry. A bit worn out from these ongoing debates, and to bring back to mind the hard reality with which we were confronted, I wrote one day in our company bulletin (n° 6 of September 1983), in an editorial which I entitled “Salvation” (inspired from a citation of Epictetus): “Notre salut ou notre perte sont au-dedans de nous-mêmes” (Our salvation and our ruin comes from within ourselves), that, “as always, the turnaround will come from no one but us and that’s the effort that I am asking of you.”
We were at the time particularly disappointed by the fact that we had not been retained by the PTT to participate in its cable television project despite the competence of our subsidiaries CLTO and Visiodis. I knew that we had been eliminated in retaliation for the CGE-Thomson agreement. That agreement had been prepared with the approval of the Ministry of Industry and the Prime Minister, but without the knowledge of the PTT, which was vehemently opposed. That’s why, in the editorial of the information bulletin, I characterized the decision which excluded us as “inique" (which means, according to the dictionary Robert, seriously lacking in equity).
That article came at an opportune time to buttress the campaign of those who wanted to see a change in the chairman at Les Câbles de Lyon, which I had become in 1981. Many union leaflets had taken up that theme for several months, making reference to efforts underway. For example, an April 1983 leaflet, said:
"Is the Suard reign in its final phase? That’s the question that can be asked at this time according to certain rumours circulating ‘in official circles’…. Whatever the case, if Suard leaves, we won’t be sorry because, as far as we’re concerned, the Suard era will remain in our memories as one of massive layoffs, of staff reductions, and hiring freezes. Admittedly, during the same period Les Câbles de Lyon has become the second cable company in the world by a deployment abroad—but at what cost for French cable companies? Is it a price illustrated by the hundreds of unemployed workers of Les Câbles de Lyon who must today be supported by the government….boss of Les Câbles de Lyon? There will remain also from his passage, especially in Lyon, grass lawns and some plantings—that’s not very much at the end of it all."
Similarly, in a leaflet dated July 1983:
"We are witnessing the same labor policies as before the nationalizations. We cannot accept that the management of a subsidiary of a nationalized company continues to behave as ‘private sector bosses’ …. After two years of experience with ‘the nationalization in the cable industry,’ it is our feeling that an inertial force is opposed to change and that that force comes first of all from the upper ranks of the hierarchy, thus encouraging those at the lower levels who are against nationalizations and the new rights…. It is no longer possible to tolerate such policies. It’s not that the chairman is incapable. No. He obtains results, but at what price? It’s that he applies a strategy that we find harmful and contrary to changes which the workers desire. To take a new direction, to apply a new strategy and a new industrial and social policy, that implies that the old players be considered ‘out of bounds.’ That implies that a new chairman, convinced that nationalizations must serve as a basis for change, be designated rapidly. It’s along those lines that we have been lobbying and that we will continue to lobby the high level authorities."
This campaign to obtain my departure gained momentum by focusing on my editorial, Salvation, and resulted in the government’s asking Jean-Pierre Brunet, chairman of CGE, to remove me from office. Mr. Brunet, being the perfect diplomat that he was, was satisfied to send me a warning letter, well-balanced, in which he chastised me for having characterized as “inique” decisions of the administration. It is true that, as France’s former ambassador to Germany, he was very appreciative of what Les Câbles de Lyon had done in Germany and understood the logic of the bold pro-development policies that we had undertaken and, deep down, was not, I think, convinced of the relevance of the nationalizations. All things considered, he was, during a difficult period, a good chairman for the group in protecting it, to a certain extent, from the whims of ayatollahs.
I felt compelled nonetheless to respond to him by highlighting the fact that I had characterized as “inique” a particular decision and not all decisions of PTT management and that I had done it in an internal bulletin in which we had the habit of openly addressing company problems. I referred to the episode again in the December 1983 bulletin in another editorial entitled, this time, "Concerning Salvation" and inscribed with this citation: “Il faut avoir le coeur bien accroché et la France devant les yeux pour ne pas tout envoyer promener” (Charles de Gaulle – June 1943) (We must maintain courage and keep France foremost in our minds in order not to throw it all away.) I wrote: "It appears that this bulletin, circulated internally, reaches an audience which goes well beyond company employees for whom it is written. In light of the reactions that it provokes in outside circles where it is read, and sometimes at the highest levels, it is no longer possible for it to remain a source for open and sincere expression. For that reason, regretfully but out of respect for the candour of our relations, I will refrain from writing from now on, silence being the last refuge of liberty.” It was easy to keep my word! (Referenced documents provided in the appendix.)
The highpoint of the nationalizations—a big Legos festival! The last acquisition that I completed for Les Câbles de Lyon benefited from these unusual circumstances. In the beginning of 1983 I was instructed by the head of CGE to contact the Thomson group, which was interested in selling its power cable line of business. It should be explained that at the time Thomson consisted of two entities managed rather independently. One was Thomson Brandt, the entity involved with power cables; and the other was its subsidiary Thomson CSF, the parent company of LTT, which was involved with transmission products and telecommunications cables.
The power cables line of business, recently reinforced by the acquisition of the cable operations of Jeumont, consisted essentially of two divisions: The Jeumont factory, which was old and antiquated and manufactured cables of all tensions but in small series and at very low productivity levels; and the Bohain factory, properly equipped, which manufactured top-of-the-line industrial cables. Thomson Cuivre (which would rejoin Alcatel in 1987) included the Chauny factory, with its continuous copper casting and its wire-drawing workshop, and a factory at Mâcon, where enamelled wire (a new field of activity for Les Câbles de Lyon) was made. The integration of Thomson Câbles didn’t present any new problems—it was, for us, albeit on a somewhat larger scale, a repetition of the Câbleries de Lens acquisition.
Several months later I was again authorized to negotiate the purchase of the cable and fiber optic operations of LTT and its subsidiary Cabeltel. But that time the process was more complicated because the cable part of the transaction was dealt with in an appendix of a larger agreement that CGE was negotiating with the Thomson group. That agreement would abruptly steal me away from the Les Câbles de Lyon group, to which I had so dedicated myself for eight years and which had given me real satisfaction, the best which I had experienced in my career, and which, looking back, overshadows all the difficulties, worries and moments of weariness and fatigue.
During that period, from 1976 to 1985, Les Câbles de Lyon, which had been completely made over, saw its consolidated sales go from 1.7 billion francs to 10.7, its profits jump from 3 million to 203 million francs, its cash flow from 80 to 580 million francs, its capital investments from 70 to 430 million francs, and the company itself move up to second place from twelfth in the world market.
In 1985 the Les Câbles de Lyon group consisted of 35 companies with 50 industrial facilities, operated in 15 countries, and employed 12,700 people, 40% of which were located outside of France. Its development outside of France was unique among the CGE companies, particularly in the United States and Germany. Foreign sales, a combination of exports and the sales of foreign subsidiaries, represented 62% of the sales of the cable sector, whereas the ratio was only 40% for the whole of CGE and 27% for telecommunications alone. The two subsidiaries of Les Câbles de Lyon in the United States and Germany were the only industrial CGE subsidiaries abroad which were significant in their respective markets. And, more particularly, over these nine years during which the company was confronted with difficulties and challenges, a true friendship developed within the management team which worked together with mutual respect and with straightforward and non-hierarchical relationships, including with their American and German colleagues who joined the team along the way.
But several months later I was going to discover a radically different atmosphere. The conclusion of the Thomson agreement and especially its implementation proved to be particularly delicate. I sensed the consequences of that with the telecommunications cable part which, overall, didn’t present any unusual problems—and we were, at Les Câbles de Lyon, experienced enough with acquisitions at that point to handle this one. It wasn’t the same though for CIT and I sensed pressure developing from CGE to have me handle the implementation of the agreement in its entirety.
Once again I was reluctant to abandon a great venture which I knew was not yet completed; but I had to yield in July 1984 to the orders of Georges Pébereau, who had become chairman of CGE, who selected me to head CIT, with the understanding that I would continue as chairman of Les Câbles de Lyon until the annual shareholders meeting to take place in May 1985 (at which the financial accounts for 1984 would be approved) in order to assure, without added risk, the integration of the cable and fiber optic operations of LTT.
Relations between Les Câbles de Lyon and CIT weren’t easy. CIT, the more powerful of the two, traditionally more profitable, and, most importantly, closer to the CGE management, appeared to the Les Câbles de Lyon staff as overly confident, domineering, and very protective of its field of activity. However, for obvious technical reasons CIT and Les Câbles de Lyon had to work together in the telecommunications field when clients requested systems and no longer simply components. CIT wasn’t very dynamic when it came to developing equipment for new systems, such as those for cable TV networks or optical transmission systems. (Les Câbles de Lyon was in charge of fibers and cables and CIT was responsible for laser diodes.) Les Câbles de Lyon, which sought to develop new products associated with cable usage, saw its requests refused a number of times in favor of CIT. (See in the Appendix the confidential November 7, 1983 letter to CGE's chairman.) Les Câbles de Lyon’s dynamism was seen as aggressive by CIT, which resulted in several episodes and a certain tension between the two companies which didn’t facilitate my arrival.
From this point forward I was to devote the majority of my time to CIT. My situation seemed to me to be particularly uncomfortable. I was general manager but alongside two other general managers, Christian Fayard, who was in charge of switching, and Dominique Balmary, labor relations manager, who also had the title of general manager of CIT. Dominique Balmary was also the human relations director of CGE and so in that capacity he reported directly to Georges Pébereau, chairman of CGE, but also chairman of CIT.
Several months later CGE's chairman structured his staff in organizing a virtual "cabinet." He appointed to it François Petit (formerly responsible for transmission at CIT), who was given responsibility for all matters involving CIT and then there was François de Laage de Meux, a CGE general manager and CIT vice president, who was in effect the "cabinet" head and who was always helpful and available to take on any responsibility. With such an organization, several people often found themselves, without even knowing it, responsible for the same problem as someone else.
I was in principle responsible for CIT’s transmission activities as well as those of Thomson, tasks for which Jacques Imbert (a former Thomson officer) had already been named; but I was also responsible for coordinating the implementation of the entire Thomson agreement. That transaction brought with it business activities in a number of fields: Transmission equipment, cables, microwave, satellites, public switching, and business systems, as well as other diverse activities involving computers and computer peripherals, all with total sales of 25 billion French francs and more than 50,000 employees.
In order to avoid having the significant losses of these various operations (more than 600 million francs a year) taint CGE’s financial accounts, a clever financial scheme was put into place with a temporary, stop-gap structure. Thomson Telecom's financial results were consolidated nither with CGE (with a 12% shareholding) nor with Thomson (with a 40% shareholding) because the government (through its telecommunications agency, the Direction Générale des Télécommunications or DGT) owned 48% of its outstanding stock. Thanks to this investment by the DGT (of over a billion francs), at the sacrifice of its own equity capital, Thomson Telecom was able to clean up the activities received before transferring them to CIT.
This was a challenging period for me. First of all, I had to familiarize myself with the telecommunications industry, which up until then I had only touched upon indirectly through my involvement with cables. Also, it was necessary to visit the people and numerous manufacturing facilities, because that was the way I always proceeded when I found myself in a new position. Faced with the magnitude of the turnaround task and the number of players able to thwart the actions of the person in charge, I sent a confidential letter to CGE’s chairman on October 12, 1984, which was not my normal way of proceeding. In that letter, I wrote:
"I am pleased to inform
you that the measures adapted by CIT and Les Câbles de Lyon for the
restructuring of LTT can be put into place on a few days' notice. It involves:
*putting in place a new management team
*putting together an economic and human resources plan designed to
--bring LTT’s level of costs down to those of its competitors
--organize management and production on a decentralized basis (equipment and cables) according to the norms and procedures of CIT and of Les Câbles de Lyon
*As a second step, consultation between management and labor.
The cost of the restructuring, in terms of stockholder’s equity, is estimated at between 1 and 1.3 billion francs, in addition to the 250 million franc capital increase currently underway.
The following are needed in order for this
plan to become effective:
a) the clear approval of the current stockholders regarding the plan;
b) their renunciation of all recourse against the decisions that the new management will have to take, considering the other responsibilities that they have elsewhere in the CGE group;
c) assurance that the restructuring can be financed—without which, the best solution for the stockholders would be to immediately institute bankruptcy proceedings."
You are aware that the situation of LTT is deteriorating rapidly and that the company is losing a million francs every business day.
In the interest of the stockholders and the company, it is urgent that a clear decision be made regarding points a), b) and c) above, or to decide to take the company into bankruptcy."
With respect to line transmission, two very similar entities (similar because they served the same client, the DGT) were operating under the same roof and it would be necessary to merge them. One, CIT, very profitable; the other, LTT, with significant losses.
The decrease in orders combined with the end of analog transmission (while waiting for digital transmission by fiber optics and despite the programs for installing cables for television distribution) made it too costly to have two entities. It would therefore be necessary to close some factories. Four out of six would be closed in two years, with significant difficulty and after holding many meetings. With respect to the closing of the Conflans-Sainte-Honorine facility, meetings would be held with the mayor, Michel Rocard, a minister and future Prime Minister, who would prove to be open to our plan and would aid with the reconversion of the site. With respect to the closings in Brittany, meetings would be held with the local elected officials and also with the ministerial offices of the DGT. Brittany was in fact the most affected. It was the result of the fact that twenty years earlier the region had the privilege of seeing all the companies participating in the boom in construction of the telephone network locate there at the urging of the government. The slowdown in orders and technological changes significantly reduced the manpower needs.
We had at least three sites that were seriously affected: Guingamp, Tréguier and Lannion. Other factories located in other regions of France would be partially reconverted with job losses, such as Coutances, Saintes, Pontarlier and Aix-les-Bains, which manufactured components for switching and transmission equipment.
Carrying out the plant closings and personnel reductions wore on all of us as pressure mounted from all sides. In addition to the expected pressure from labor organizations, there was pressure from politicians passed on by their staffs who had the ear of CGE management, and sometimes there were even untimely calls from Elysée. Indeed, many considered nationalized companies to be extensions of the government, and so naturally at its command. Here, for example, is an excerpt of a letter sent on December 13, 1984 by the CGE and Thomson chairmen, Georges Pébereau and Alain Gomez, to Louis Schweitzer, head of the Prime Minister’s office:
"J.-C. H. informed us yesterday afternoon that the government, in its capacity as shareholder of Thomson Télécommunications, imposed two conditions on the granting of financial aid to LTT and the government's agreement with the restructuring plan: That the procedure for consulting the Central Employee Committee not be initiated; and that the Thomson Télécommunications board meeting be held without raising the issue of that consultation.
"These instructions were scrupulously followed and the Thomson Télécommunications board meeting was held yesterday in a calm atmosphere, pursuant to a scenario that had been previously worked out with J.-C. H.
"During discussions that same Tuesday, December 12, the government representatives made two other commitments to us: First, to proceed within the next few days with the 125 million franc purchase by the government of a share in LTT, constituting almost the majority (an urgent transaction with respect to Thomson’s consolidated financial accounts); secondly, to immediately eliminate the roadblocks holding up the approval of layoffs in the different facilities affected in CIT/TT (a vital measure to de-escalate the extremely tense human relations and political situation).
"We are counting on you personally to see to it that these two commitments are as scrupulously respected as were ours."
Concerning the same transaction, a minister holding office wrote to them:
"…All having been re-examined and, whatever may be the obvious difficulties associated with this matter to which you have alerted me, I consider that it is not possible to proceed with the steps you are considering without first having spent the time necessary to examine and determine...
"I don’t intend to reconsider my position and am asking the Prime Minister to send you a directive along those lines."
I remember also to have been summoned one Saturday to a meeting at the ministry of the PTT regarding our Brittany restructuring plan, where there would be a confrontation with labor unions, political leaders, the minister’s staff and the DGT management. Alone with one other staff member, I had to face, during six hours, conflicting objections of about 30 people, in agreement on one point—that CIT should not lay off employees—but without proposing a solution and while evading the root of the problem—the government’s reduction in orders. PTT orders for telephone cables, for example, had dropped, in comparison with 1982 levels, 20% in 1984 and 40% in 1985. The drop in sales for the equipment was on the same order of magnitude. I refrained from asking for new orders because I don’t believe you can resolve structural problems by an analgesic. I tried to convince those present that it’s a business leader’s duty to provide for the future in adapting, without delay, to changes in the market. I didn’t convince anybody and the meeting came to an end only because of the departure schedule for the last trains leaving for Brittany.
I found such conversations to be pathetic and, to a certain extent, dishonest. Nobody wanted to change anything in CIT’s restructuring plan, but certain participants "from the rank and file" who had come from Brittany hoped, perhaps sincerely, for concrete results. They must have really been disappointed to see themselves so badly supported by “their own” in Paris.
Sometimes union protests turned to downright violence. In fact, CIT’s headquarters office was besieged one day by professional commandos of the CGT. We didn’t let them into the building, and so they didn’t hesitate to force their entry by derailing and knocking down the heavy metal entryway which prevented access to the courtyard. Luckily, it tumbled and crashed directly to the ground without injuring any of the CIT employees who were guarding the entryway.
I remember that incident because I hosted Paul Villières that day, a vice president of AT&T, for another round of negotiations. We kept him from finding out about the uprising as long as possible; but when it came time for him to leave to catch his plane, we had to inform him of some of the problems created by the restructuring that we were undertaking. On his way out he had to climb over the overturned gate and most certainly could not have avoided noticing the other destruction that had been caused. He was left, no doubt, with a very poor image of the labor relations situation in France.
Alongside the labor relations problems which, for me, dominated these months, it was necessary to ensure the management of the whole operation. There were certainly enough of us to do that—too many, in fact—and the structures were complex with the different shareholders. But with CGE and Thomson SA being nationalized and the government also being directly present at the level of LTT and Thomson Télécommunications, finally the conflicts of interests were reduced. Management proceedings regularly pulled together a good number of people: Eleven people for the Thomson-CGE coordination committee, which met at least once a month; an equally large number for CIT’s management committee, which met more frequently; and, finally, the board meetings for these various entities, as well as those of their subsidiaries, which were held every two or three months. It was also necessary to attend Central Employee Committee meetings and a countless number of planning and budgetary meetings of the different entities.
And particular mention must be made of the relationship with the DGT, with which I became familiar upon my arrival at CIT. For Les Câbles de Lyon, the DGT was an important customer, but the DGT had a lot of other cable suppliers. At CIT, with respect to transmission, the situation was similar, but with only three suppliers. With respect to switching, there were also three suppliers but in fact they were not really in competition since their different products were relevant only to specific orders. This led to some bitter discussions, especially for the research and development contracts or "export assistance.
Indeed, the DGT followed, even piloted, the export policies of its suppliers. Sometimes it decided who would export to which country. In fact, it also decided the financial results of its suppliers through its multiple interventions, usually solicited, and generally in the last weeks of the fiscal year when, as a practical matter, the amount of research and development contracts awarded determined a company's profit levels, since it had to report as expenses for the fiscal year the research expenditures which were not financed by government contracts. Networking and lobbying among the various contacts that so-and-so had with contacts in the government, internal information gathering, interpretation of rumours, and interpretation of things not said took a lot of time.
Yet everyday management problems (technical and commercial) were not lacking to occupy our time. In the transmission sector the integration of the CIT and Thomson activities was undertaken without delay—necessitated by LTT’s possible bankruptcy. The similarity of the two company’s products facilitated the process. With respect to both public switching and business systems, two of CIT’s managers, Christian Fayard and Xavier Namy, were given responsibility for handling the equivalent activities of Thomson. In public switching there was head-on competition between CIT’s E10 and Thomson’s MT switch. It was thus decided, instead of selecting one of the existing systems, to develop an entirely new system which was called the “produit de conquête” (product to conquer). With respect to business systems, as well, each of the two company’s PABX systems—Telic for CGE and Opus for Thomson—were maintained in parallel, each with its own sales network. In defense of those who made these decisions, it must be recognized that at the time each company sold essentially in the French market and there had been a history of competition, and even rivalry, between them. With respect to public switching exports, these were initiated or, at least, supported by the government, and each party had made it a point to lobby the government in that regard. It was therefore difficult to impose peace and cooperation on these two teams. It even took a long time just to arrive at an armistice.
Occupied with all these general management problems and the merger, I was not very available for and, in fact, not very interested in participating in all of the international negotiations that Georges Pébereau was undertaking. For me, the first priority was to put together this joint company, Alcatel Thomson. Nonetheless, from the beginning of 1985 I had to help with the multiple contacts that were attempted and which sometimes succeeded.
I remember, among others, one of our quick negotiating trips to New York. Georges Pébereau travelled that day with several of his staff members on the Concorde from Paris to New York. He was seated in the front of the aircraft and called on each of us, one after the other, to take the seat next to him to discuss current business matters that we were involved in. We experienced something startling that day. One hour after the departure from Roissy Airport in Paris, and while we were cruising at a speed of Mach 2 and at an altitude of about 60,000 feet in a sky completely calm and blue, the aircraft suddenly was shaken by several violent and noisy jolts and went into a nose-dive. An impressive silence came over everyone. At the end of several long seconds the voice of the captain, apparently calm, announced that the aircraft was experiencing technical problems that he was trying to identify. The aircraft continued to go down rapidly. After thirty seconds we got another message from the captain that there was a problem with the control system for the motors’ air intake vents which obliged us to return to Roissy, but at subsonic speed.
The tension on the plane wasn’t really alleviated until we landed at Roissy, at the same time that we should have already been at work in New York. As we landed on a runway surrounded by a large number of fire trucks, the applause of the passengers showed their relief. But I have my own particular memories of this tumultuous flight. While the aircraft was plunging and we were left in the midst of uncertainty, my immediate reflex was to drink the aperitif on my tray table. I don’t know whether it was like the “last cigarette of a person condemned to death” or simply a way to avoid its spilling. People were saying that Georges Pébereau barely interrupted his conversation with his neighbor at the time.
The tension that I had felt at CIT since my arrival in 1984 increased in early 1986. The approach of the election period and the uncertainty it created about the future of nationalized industries created a highly charged atmosphere. As for CIT’s management team, we were all hoping for a clarification and simplification of the organization. The progress in our negotiations with ITT put a cloud over the future in spite of the hope that came with its possible success. The hiatus was wide between everyday life in this newly developing Alcatel Thomson entity, with its internal rivalries, its blockages, and its unresolved contradictions, and the dream of an Alcatel rising up to first place in the international market
Once again, I would not have to choose my destiny. In mid July, Edouard Balladur, Minister of Economy, summoned me to a meeting to tell me that he intended to propose to the Council of Ministers that they appoint me chairman of CGE to prepare for its privatization. He wanted confirmation that I would accept. I responded that I wasn’t seeking the position but that would accept it if the government so desired. I ventured to ask why the existing chairman couldn’t continue in his position. His curt response was immediate. It was a question of principle, but he would look after his future. It is true that Edouard Balladur was very familiar with the group, having presided over CGE subsidiaries for more than ten years.
For me, that meant that I was leaving the imbroglio of CIT. I said to myself, perhaps in a lack of modesty, that after all I had a number of qualifications for that formidable function over a candidate coming from outside. Over the 13 years that I had been learning about the group, I was beginning to become familiar with its diverse activities. After the several hundreds of persons that I had managed at Sogelerg, the several thousand at Les Câbles de Lyon, and the several tens of thousands at CIT, as well as the many acquisitions carried out, I had at least gained a lot of experience on the job which would be a useful asset for what was to come. I experienced ahead of time a certain amount of satisfaction over the possibility of becoming the first chairman to have begun his career so modestly in the CGE group.
 French telecommunications and postal service. (Translator’s note)
 Office of the President of France. (Translator's note)
 The CGT (the General Confederation of Labor) is one of the largest and most radical of the French labor unions. (Translator's note)