France Tries to Save Groupe Bull
Despite approach of united Europe, governments move to prop up computer companies. EUROPE'S HIGH-TECH STRUGGLE
IN the largest French electronics store, FNAC, the computer section is packed with IBMs, Commodores, Ataris, Sonys, Epsons, Toshibas, and other American or Japanese brands.But not a single French computer is on display. "No one would want to buy a French computer," the salesman explains. "They're more expensive and less performing." These attitudes frighten the French government, especially the new Prime Minister Edith Cresson. She took the job in May vowing a crusade against Japanese - and American - domination of the global electronics industry. Her first target is the state-owned French computermaker Groupe Bull. Bull lost more than a billion dollars last year. The French government has responded with massive aid. Over $1 billion of the taxpayers' money will be poured into Bull over the next few years. When it comes to computers, Bull and the French are not alone. Germany's Siemans, Italy's Olivetti, and Britain's International Computers Ltd. have been losing billions of dollars and laying off thousands of workers. ICL was forced to sell out to Japan's Fijutsu. Now the remaining independent players say that unless they get help from their governments and the European Community, they may not survive. "In these technologies, you cannot say that the market can regulate everything, because the market is very shortsighted," explains Georges Grundberg, Bull's vice president. "These are strategic industries for the future, because information technologies are the basis of all the economy." But intervention and state subsidies threaten to torpedo Europe's ambitious 1992 single-market program. In recent months, governments across the continent have been intervening at a faster rate than ever to prop up near-bankrupt national industries. The Italian government recently gave almost $250 million to revamp Italy's trucking industry; Belgium recapitalized its state-owned airline with $1 billion; even powerful Germany subsidized its coal industry to the tune of $2 billion plus. "You must remember that this idea of the big single market was ... to help European industry become more competitive," says Philippe Moreau Defarges of the French Institute of International Relations. "Today many industrialists and many politicians are discovering that this big single market could help not European industries, but Japanese and American industries." Bull manufactures all of its personal computers for Europe in Lille, an industrial center on France's northern border. The city was once a rich center for steel and coal mining. But this past year its last coal mine closed, and now, the region is counting on high-tech for its future. If Europe's battle to save its computer industry is to be won, the battle will be won here, Bull officials say. The factory, built in 1986, is one of the most modern in the world. Since Bull's purchase last year of part of America's Zenith Electronics Corporation, it also produces Zenith portable computers. But the Lille factory still operates far below full capacity. Many work stations are not manned and workers stand around with little to do. Perhaps even worse, almost none of the components which go into the final product come from France. Most come from Taiwan or Japan. This dependence squeezes Bull. It wants help from the French government to fight off the Japanese threat. But it also wants to increase its cooperation with the Japanese. Specifically, it hopes to allow the computermaker NEC to take a 5 percent share in the company. "On the one hand Japanese companies are very strong and fight very hard," says Jean-Pierre Leplat, the Lille Factory Director. "But at the same time, they have the technology - for memories, for flat screens and so on. We have to fight against them, but we have to have some type of technical agreement with them." Workers at the Lille factory like Jean Yves Guichaoa are caught in the middle of this tug of war. After the Bull factory in the Paris region was closed last year, he was reassigned to the Lille factory. Some 10 percent of Bull's work force will be laid off this year. Now Mr. Guichaoa believes his future is dependent on Prime Minister Cresson. She came to power promising to block the NEC deal, only to back off at the final moment when it became clear that the move could destroy Bull. But Guichaoa still is counting on her European crusade to save his job. "Cresson wants to defend French industry," he says. "I think she'll reduce Japanese imports, and I think that's good." Despite their desire to hook up with NEC, Bull officials insist their future remains as an independent player. They say new infusions of government funds will allow increased investment. Above all, they count on mounting support for a European-wide industrial policy: "We have very good examples in other industries, where Europe really did the right things, and became very competitive after lots of problems," says Mr. Grundberg. "Its true for steel, its true for space. When ... European manufacturers really started to cooperate ... there has been good success." In Fortune Magazine's new "Global 500" list, two European companies are among the world's top 10 computermakers: Olivetti is No. 7 and Bull is No. 8. But they are only about a tenth the size of giant International Business Machines Corporation. The Europeans are surviving entirely thanks to state subsidies. In France, it costs nearly 50 percent more to buy a computer than in the United States. The reason is simple: tariffs designed to protect companies like Bull. For Frenchmen like Alain Pichon, these issues are no abstractions. He runs an electronics store just across the street from FNAC - which sells only Japanese goods. "The Japanese products simply are better than the European ones," he says. "There is an advance of several years in the technology, design, and functioning of the products." And not long ago, Mr. Pichon discarded his French-built computer - for one made by Apple.