Friday 31 August 2018

Business as usual ?


The sudden resignation of Nicholas Hulot, from his post as Ministre de la Transition Ecologique et Solidaire (Minister for Ecological and Soldarity-driven Transition) may have come as surprise by the manner and timing of his departure, but it is surely less of a surprise to those who have become used to the regular reports of misgivings about his role in government and his seeming inability to make a meaningful impact on France’s environmental and energy policies.



Nicholas Hulot, now 63, was, the pollsters tell us, the government’s most popular minister, well-known in France for many years as an environmental activist. He rose to fame through a series of TV programmes that he made and introduced, designed to illustrate the impact of our growth driven economic model on the natural environment and its responsibility in climate change. He set up a foundation to promote environmental responsibility but also, with the help of the large French company, L’Oréal, launched and sponsored a range of beauty products bearing the name of his TV show “Ushuaia”, from which he continues to make a comfortable living. Politically, he was courted by no less than three French presidents, Jacques Chirac, Nicholas Sarkozy and François Hollande, keen to enlist this popular public figure in an attempt to burnish their own green credentials. Although Hulot was happy to serve as an unofficial advisor, he did not, until persuaded to do so by Emmanuel Macron, accept a ministerial position, considering that he was more useful trying to influence the policies he advocates from outside government. Paradoxically, his 15-month stint as minister of Edouard Philippe’s government has proved that he was right. Temperamentally ill-suited to the cut and thrust of everyday politics, profoundly unhappy with opposition from both within the government, notably from the Minister of Agriculture, and outside it from lobbies of all sorts, he swallowed hard as many government decisions went against him – on the use of pesticides in agriculture, the reduction of France’s considerable nuclear capacity, the watering down of his attempts to promote animal welfare and many others. The presence of a well-known lobbyist at a meeting convened by the President with representatives of the hunting community seems to have been the last straw. The following morning, he announced on a radio programme, to the astonishment of even his interviewers, that, “unwilling to lie to myself any further”, he was leaving the government, without so much as notifying the President or the Prime Minister beforehand.



If this were just another case of strongly held views clashing with the inevitable compromises required by cabinet government, the story would be only one more example of many a civil society figure who has come to grief as a politician. As former socialist grandee, Jean-Pierre Chevènement, once pithily observed, “a minister either resigns or keeps his trap shut” (“Un ministre ça démissionne ou ça ferme sa gueule”). I fear however that this particular resignation is more significant, as it touches on the heart of the project that Emmanuel Macron has sought to promote, the main reason why this relatively unknown figure emerged from the shadows to set up his own party and conquer both the presidency and a whopping parliamentary majority in little more than a year. And also finally persuaded Nicholas Hulot to accept a formal political mandate.



Macron clearly sees himself as a man with a mission to profoundly transform France, harbouring a clear vision about what he wants to achieve and an unshakable belief in his ability to bring about the changes that the country has shirked so often in the past: freeing businesses from the shackles imposed by an often overbearing administration in order to create more jobs, make work pay and reduce unemployment, thereby reducing public spending and making France, particularly its public sector, leaner and more efficient.



There are many who share Macron’s view that France must accept radical change to achieve these goals, and they see him as the agent of that change. The resignation of Nicholas Hulot is an important signal that things are not going according to plan.  A transition towards a greener and less energy intensive economic model is clearly being resisted by deeply entrenched interests that have most to lose from it: the powerful nuclear lobby, afraid of France losing its technological expertise, a strong farming lobby, still wedded to its pesticide and energy fuelled quest for ever greater yields, to name just two. There are other signals too: the preparation of next year’s budget is constrained by an unexpected dip in growth, a rising deficit and fears in high places about the psychological impact of the pay-as-you-go income tax scheme, due to be introduced in January.  On the basis of what we know so far, the draft budget to be debated in parliament this autumn sounds decidedly unradical, based on little more than the time honoured methods of reducing the number of civil servants, cutting social benefits and surreptitiously increasing taxes.



In a word, after what looked like a promising start, the profound transformation that was Macron’s pledge to the French people seems to be running into the sand. The government and its supporters point to the policies of encouraging investment, making the labour market more flexible, promoting the training and retraining of workers and employees and plead patience. Such measures will of course take time to produce results, but there nevertheless seems to be little trace of a root-and-branch restructuring of central and local government that other countries like Canada, Sweden, or the UK have introduced in the past decades. On top of that, where is the evidence of a new paradigm reconciling economic growth with less pressure on natural resources and more renewable energies? At a time when Germany is implementing a radical decision to close all its nuclear power plants by 2022, there were reports yesterday that some experts in France recommend building no less than six new EPR reactors starting in 2025. After a series of official meetings earlier this year on food production and retailing, it is clear that the French are increasingly keen on organic produce and recycling, but supermarkets still vie with each other to sell processed foods laced with additives and fruit and vegetables raised on chemical fertilisers and pesticides at the lowest possible prices.



As Macron makes a start on a decisive year for his presidency, these questions remain unanswered.  The outcome of the budget debate, the name of the next minister of the environment or perhaps a fresh political initiative will either confirm that profound transformation is still on the agenda or, on the contrary, that France is back to business as usual.

Wednesday 22 August 2018

Air France or Air Chance ?


Ever since he was elected to the presidency of France in May 2017, Emmanuel Macron has been done his best to portray France as an outgoing nation, keen to engage with the rest of the word and particularly with France’s European neighbours. He has not been unsuccessful in improving the country’s image beyond its borders with many captains of industry reporting that their foreign counterparts have noticed the difference. It is true of course that many of France’s most dynamic industries went global years or even decades before Macron appeared on the scene. Companies like LVMH, Total or Schneider Electric, to name just three, garner more than 50% of their profit from international markets. Large holdings of companies in the CAC 40 index are owned by non-resident investors, as is a considerable portion of France’s public debt. But Macron has definitely given this established trend a further push, consolidating it with more business friendly policies, like the loosening of employment regulations and the neutering of the wealth tax in the hope that wealthy French people will invest in businesses in their home country rather than hide themselves, and their fortunes, in more tax averse jurisdictions. Macron’s France has also been keen to style itself as a start-up nation and encourages its numerous start-ups to go global as soon as they are up and running.



Against this background, it comes as a considerable surprise to hear the unions representing the staff of France’s flag carrier, Air France, reacting so violently to the appointment of Ben Smith, ex Air Canada, as the airline’s CEO starting at the end of September. A press release issued by all of Air France’s union said: “it is inconceivable that Air France, that has been French since 1933, should fall into the hands of a foreign manager at the probable instigation of one of its major competitors”.  The major competitor referred to is apparently Delta Airlines that holds 8.8% of Air France’s stock and with which the airline has a code sharing arrangement, as it does with many other European and international carriers.



Once the initial shock of such a statement has passed, it is worthwhile recalling the state of Air France in 2018. Despite participating in the wave of consolidation of European airlines since the turn of the century by merging with the Dutch carrier KLM in 2004, in what is a textbook example of a globalised industry, Air France has been bleeding market share for years: to airlines based in the Gulf at the premium end of its business and to the likes of Easy Jet and Ryanair at the cheap end. Meanwhile, its pilots and cabin staff have been embroiled in endless negotiations over pay and working conditions with a series of bosses, all from the senior echelons of France’s civil service, ending more often than not in damaging strikes. The latest strike this summer is reported to have cost the company well over €300 million. Its most recent boss resigned in June after losing an ill-judged referendum that he called over the heads of the unions. After what must have been frantic behind the scenes consultations within the French government, that still holds 14.4% of the airline’s shares, the company’s Board has only just got around to appointing his successor. Meanwhile, passengers flying out of France are busily comparing prices on the Internet and voting with their wallets. Even those, like myself, who have always had a soft sport for the national flag carrier and make it their first choice as a matter of principle, are increasingly fed up with its frequent delays, often surly and off-hand cabin staff and regular strikes.



The reaction reported above would perhaps be more comprehensible if Air France was the one and only French company to be managed by “a foreigner”. But it is not. The good old French tradition of having its leading companies managed by graduates from Polytéchnque and ENA has been slowly breaking down, for better or for worse, for over ten years. Its number 1 drugs company, Sanofi, was managed for some years by a Germano-Canadian, Christopher Viehbacher. Its number 1 retailer, Carrefour, had a Swedish boss, Lars Olofsson, for three years and Carlos Ghosn, who has a stellar record of turning around and expanding the country’s number 1 carmaker, Renault, does indeed hold a French passport  (and did graduate from Polytéchnique!) but is also Lebanese and Brazilian, definitely global in his outlook and is known to eschew hobnobbing with home-grown power brokers and influencers. Not to speak of French managers who have made their mark abroad, like Jean-Pierre Garnier who ran Glaxo for seven years and engineered a major merger to form GlaxoSmithKline, or Xavier Rolet the boss of that ultimate den of capitalism, the London Stock Exchange, for eight years until 2014. As more and more global companies, including French ones, find it perfectly normal to scour the world for top management talent, regardless of nationality, why is it that the appointment of a Canadian manager with a proven track record in his industry raises so many hackles in France?



One can only hope that Air France’s unions and the employees they represent will finally wake up to the dire straits in which their company finds itself, realise that the French government’s patience is no longer endless and engage with their new CEO, who, despite his very Anglo-Saxon sounding name, does actually speak French! He also comes with a reputation for dialogue and a track record of turning around Air Canada by, among other things, launching a low-cost subsidiary. In his first press release, he has said that he is looking forward to working with all the airline’s staff and their representatives. He will certainly have his work cut out to avoid further turbulence and yet another strike that has been threatened unless substantial salary increases are awarded.



It is often said, somewhat complacently perhaps, that so many things have changed in France since Macron became President. In some ways they have, as this blog has attempted to chronicle. The events surrounding the appointment of Air France’s new CEO however are just one illustration of how far it still has to go.