News of the Week
FRENCH CHEMICAL FIRMS FACE NATIONALIZATION François Mitterrand's election to the French presidency presages a change in the structure of the country's industry, including its chemical industry. A plank in his electoral campaign was to bring about nationalization of 11 companies, including ' RhônePoulenc, France's largest chemical concern, along with some of the banks and insurance firms not now under state ownership. This nationalization program, on the other hand, could be thwarted by a confused and divided Parliament. For to bring it about, Mitterrand needs the support of the National Assembly. But should it materialize, the share of annual chemical sales made by government-owned companies would shift from the present level of somewhere around 25% to closer to 60% of the total. Mitterrand, a socialist, but by no means a Marxist, officially assumes the presidency next week. His first official act will be to dissolve the National Assembly, with its preponderance of conservative and centrist members, and call for a general election. This will take place at the end of June. Whether the new National Assembly will comprise a majority of leftists is a subject of considerable speculation. After the first flush of exhilaration and jubilation that followed the defeat of the conservative incumbent Valéry Giscard D'Estaing has died down, French voters may pull back from the brink of adopting a socialist government. And without one, Mitterrand would have a very rough political time during his seven years in office. At press time, there was still considerable uncertainty among chemical management men in France over the nationalization issue. No one seems certain what the practical consequences of such a step would be or how, and over what time span, it might be achieved. And the general consensus is that government takeover of a private concern wouldn't necessarily solve or ameliorate the problems that corporate executives are striving to cope with in the ordinary course of their business affairs. The French chemical industry of late has been encountering the same degree of economic difficulties as has the industry in other European 4
C&ENMay 18, 1981
ceeded $6.6 billion, is high up on the list of world chemical leaders. State takeover of PUK and Rhône-Poulenc presumably would call into question management plans for their near- and longer-term corporate development. PCUK, for instance, has been something of a financial drain on its parent in recent years; last year PCUK lost $23 million. It has pulled out of the nitrile rubber business. Last month, too, its senior management held talks with Occidental Petroleum to discuss areas of likely "cooperation." Suggestions that Oxy might be considering acquiring some, if not all, of PCUK's operations have been denied on both sides. But if such a move were contemplated, it would be much less likely to happen if the French government were involved. A "EuroMitterrand: needs assembly's support. pean solution" to the company's problems, if not a wholly "French countries and elsewhere. Through solution," probably would be the nationalization, the government preferred course of action in place of would be expanding and enlarging the an acquisition by a U.S. company. Rhône-Poulenc also is in the throes burdens imposed on it from other sectors of the economy, so the argu- of a major restructuring program. It already has greatly reduced its stake ment goes. So why nationalize? It's purely a in basic chemicals and petrochemipolitical issue. At its simplest, the cals. Last year, for instance, chemicals desire of the electorate is to have a accounted for 27.5% of total sales greater direct share in the activities compared to almost 40% in 1979. And and wealth of their country's busi- it is working toward a radical nesses. But sharing also entails an streamlining of its ailing synthetic element of responsibility. And the fibers business. This year it intends to program could backfire if carrying it trim its chemical fibers work force through results in expanding the in- about 4000 from the current level of 8200. Should France take control of flationary spiral. The 11 companies targeted for na- the company, job trimming might be tionalization in the original program curtailed or at least delayed. This doesn't mean that statedrawn up several years ago include Pêchiney-Ugine-Kuhlmann (PUK), owned French chemical enterprises Rhône-Poulenc, Roussel UCLAF, are run any less efficiently or with less and Saint Gobain-Pont-a-Mousson, regard for the bottom line of the a diversified industrial group with statement of accounts than are those some chemical-related interests. It's whose stock is traded on the Paris unlikely now that Roussel Bourse. CdF Chimie, Entreprise MiUCLAF—maker of pharmaceutical nière et Chimique, Société Nationale and specialty chemicals, crop pro- Elf-Aquitaine, and Société Nationale tection agents, and cosmetics—will be des Poudres et Explosifs, for instance, involved because West Germany's all with government ownership of just Hoechst since has acquired a 57.7% under 50%, operate independently of ministerial interference. These comstake in it. PUK, which is mainly in the non- panies are profit-motivated and their ferrous metals business, makes a wide management is expected to take range of chemical additives through whatever actions may be necessary Produits Chimiques Ugine Kuhl- for them to remain viable. Staff at mann (PCUK), a wholly owned sub- CdF Chimie, for example, has been sidiary. And, of course, Rhône-Pou- reduced about 10% during the past lenc, with sales last year that ex- year, and further cuts are likely. D
