Friday, July 20, 2012

The Montebourg Enigma

Arnaud Montebourg: grande gueule and showboat, as his detractors say, or pourfendeur des patrons et protecteur des veuves et des orphelins, as Audrey Pulvar no doubt imagines him? Perhaps a little of both. The two are hardly incompatible. In any case, the omnipresent Arnaud has riled up the Peugeot family, Copé, and perhaps a few Socialists a little jealous of his Sarkozyesque flair for putting himself in front of cameras and microphones at every turn. The real question, however, is not whether Montebourg is too theatrical--of course he is--but whether theatrics can be more effective this time than when, say, Eric Besson, with similar effets de manche, called in the CEO of PSA to jawbone him out of outsourcing some productive functions to Eastern Europe. Because you can't simultaneously fault Peugeot for its failure to develop a winning business strategy and for its failure to face down the previous government when a business strategy that might have proved effective ran counter to the government's wishes.

To be sure, Montebourg's specific charges include an excessive withdrawal of capital from the firm by family interests, which arranged to pay themselves too much in dividends rather than plow the cash back into a failing company. But let's face it: a Socialist government trying to manage a neoliberal economy is frequently going to find itself hoist by its own petard. Outsiders who watch the shadowboxing exhibitions mounted for the diversion of the public can't really form a clear picture of what's going on. Montebourg might have some idea, but then again he might not. He might give himself a better shot at acquiring a clear idea if he adopted a less aggressive public line, if he sought to reconcile company executives, union representatives, suppliers, and other interested parties for the purpose of reaching a consensus as to what a viable strategy might be. This would be the German approach, but neocorporatism wasn't built in a day, and it may not be compatible with French mores. So what alternative does Montebourg have, realistically speaking? If he finds the right combination, he may be destined for great things. If, as is more likely, he doesn't, he may find himself the first ex-minister of the Ayrault government.

UPDATE: Apparently there will be subsidies to manufacturers for producing the "right" kinds of cars:

Ce plan passera par un "soutien massif" aux véhicules "innovants et propres",mais le gouvernement exigera des "contreparties" des constructeurs, selon le ministre du redressement productif. "Nous écartons la prime à la casse et nous nous dirigeons vers des formes de soutien massif vers les véhicules (...) hybrides et électriques", avait expliqué M. Montebourg. "Nous sommes très tentés d'accentuer les mesures liées au bonus malus écologique", avait-il ajouté.
Renault a fait de l'électrique un axe majeur de son développement, tandis que PSA Peugeot Citroën privilégie l'hybride. "Nous souhaitons pousser cet avantage, donc finalement favoriser les constructeurs qui travaillent sur le territoire français", avait déclaré M. Montebourg.
Is this the "right" strategy? Without knowing more about where the research & development efforts of the respective companies stand at the moment, it's hard to say. Competitive new technologies cannot be put in place overnight. PSA's partnership with GM may be key here, but what PSA has in mind does not appear to be a Euro version of the Chevy Volt. If it is going hybrid, it will be competing directly with Honda and Toyota, which have a substantial advance. Unless PSA has a winning product up its sleeve, one might question the wisdom of this choice.


bert said...

How to justify a subsidy?
Not with nationalism, mes camarades. With ecobollocks! Hooray!

This is no different from Sarkozy's interventionism on behalf of the strategic yoghurt sector. Left or right, at bottom a Frenchman in government is a gaullist.

Mitch Guthman said...

I agree that eventually the types of reforms that Germany made in 2010 will be necessary in France's industrial sector. I also agree that there may be some significant cultural barriers to adopting some of those reforms. They were easier for Germany because their system already recognized the interests of labor, suppliers and shareholders in corporate governance so in many ways the foundation for the Agenda 2010 was already there. Which in turn made the reforms in social security and union rights easier and more palatable to labor. I would be the first to acknowledge that if France wants to have large scale manufacturing, some changes along these lines will be necessary.

At the same time, however, I would make two other points:

First, setting to one side your pessimism about the ability of French automobile manufactures to compete globally, the problem I see with this situation is that this is just another example of lemon socialism. The French government long ago took over the responsibility for the automobile sector because its collapse would be disastrous for the economy. And it propped them up even as it allowed the managers and owners to run the companies in their interests rather than in the interest of the state.

Nevertheless, I accept that Montebourg’s hand has been forced because of the economic crisis but it seems to me that if the French government is going to provide a subsidy then the state should have the final say on dividends, salary and stock options. The way France is doing things now gets them the worst of both worlds: The government props up weak and inefficiently run companies when times are bad but doesn’t get any of the profits when times are good.

Second, Fiat makes great little cars and is profitable. All German cars are of high quality and all their automakers are profitable. There is a market for the cars Montebourg is talking about; it’s a growing market. Today, there is only one maker of reliable plug-in hybrids (Toyota). Everybody else is just now dipping their toes in the water---there is time and plenty of room for France, which once made wonderful, iconic cars on the cutting edge of design and technology. I see no reason why they can’t do so again (see, Italy, example of)

Anonymous said...

Don't know whether you can trust Marianne but here's a clear summary about their article on the topic