Compagnie Gén

views updated

Compagnie Générale Maritime et Financière

22 Quai Gallieni
92158 Suresnes Cedex
France
(33) 1-46 25 70 00
Fax: (33) 46 25 78 00

State-Owned Company
Incorporated: 1973
Employees: 13,890
Sales: F 13.02 billion

State-owned Compagnie Genérale Maritime et Financiére (CGMF) is one of the largest maritime transportation companies in France and one of the few seaborne freight carriers whose reach spans the entire globe. Although the company has terminated most of its operations between Europe and North America, CGMF vessels still serve more than 180 ports in six continents. The company runs its core maritime freight business through its largest principal subsidiary, Compagnie Genérale Maritime (CGM), and through other subsidiaries handles operations in refrigeration, maritime passenger transportation, and financial services.

CGMF was formed in 1973 as a result of the merger of two long-standing, state-owned maritime transportation concerns, Compagnie des Messageries Maritimes and Compagnie Générale Transatlantique (Transat). Compagnie des Messageries Maritimes dated back to the early eighteenth century, when it operated a postal network that specialized in carrying mail between Paris and Marseille by coach. It was then known as Société Anonyme des Messageries Nationales and eventually became the government-owned national postal service. France’s expanding colonization of Algeria led Emperor Napoleon III to grant the company a charter in 1851 to operate a seaborne mail service between France and other countries bordering on the Mediterranean Sea. The Services Maritimes des Messageries Nationales was created, and its name was changed two years later to Services Maritimes des Messageries Imperiales. Indeed, the range of the company’s services broadened with the growing scope of France’s imperial ambitions. In 1871 Services Maritimes des Messageries Imperiales began opening routes to the Far East, grandly announcing its intention to turn the Mediterranean into “a French lake at the gates of the Orient.” It also changed its name again, this time to its final form, Compagnie des Messageries Maritimes.

In 1920 Messageries Maritimes was acquired by the Chargeurs Réunis shipping group but continued to operate under its own name. In the wholesale reorganization of the French merchant marine that took place in the aftermath of World War II, however, the government resurrected Messageries Maritimes as an independent entity, providing it with old Liberty Ships that it had acquired as compensation for war damages. Chargeurs Réunis retained the surviving assets of the old Messageries Maritimes under the name Compagnie des Transports Océaniques. In the post-World War II period, the new Messageries Maritimes operated as a bulk freight carrier owned partly by the government and partly by private investors.

Transat was founded in 1855 by shipbuilders Isaac and Jacob Emile Pereire to transport mail, goods, and passengers across the Atlantic Ocean. In 1860 Napoleon III granted the Pereire brothers subsidies for the construction of 14 steam-powered ships and permission to operate them on the lucrative Le Havre-New York City and St. Nazaire-Antilles-Panama routes. In 1869 Transat became the first company to send ships to China through the newly opened Suez Canal.

In 1906 Transat chairman Charles Roux helped usher in the era of the luxury passenger liner when he set a new strategy for the company that featured luxury passenger transportation. Interruptions brought about by World War I did not stop Transat’s momentum in the development of this form of transportation. After the war’s end, the company began a major fleet reconstruction program that turned out newer and fancier passenger ships. During the 1920s and 1930s lavishly appointed Transat liners such as the Normandie and the He de France became virtually synonymous with high-class sea travel. The company ran up considerable debt in commissioning so many new ships, however, and when the Great Depression compounded its financial problems by slashing freight rates, Transat was forced to seek help from the government. In 1931 the French government agreed to secure Transat’s loans and acquired a majority stake in the company in return.

After World War II, Transat experienced a long and severe decline in its passenger business. The inexorable rise of the airplane as the transoceanic mode of choice for travellers and mail transportation alike hurt the company. Also, as most of France’s colonial possessions gained their independence and severed ties with the mother country, demand for maritime transportation between France and the former colonies fell off. As a result, Transat abandoned its passenger service to the Indian Ocean and the Far East during the 1960s. Algeria’s successful rebellion against colonial rule cut down on traffic to French North Africa considerably, and in 1969 Transat merged its reduced service to the Maghreb with that of Navigation Mixte, forming Genérale Transméditerranéene. The company terminated its venerable Le Havre-New York passenger line in 1974 and abandoned service to the West Indies and South Atlantic by the end of the decade.

By contrast, Transat’s freight transportation business held firm. Like Messageries Maritimes, it received a number of former Liberty Ships to help it recover from the destruction caused by World War II. In 1967 Transat joined with four other maritime carriers—Swedish companies Transatlantic Shipping and Wallenius Lines, British carrier Cunard Ellerman, and Dutch shipper Incotrans—to form Atlantic Container Line, a consortium serving the East Coast of the United States and intended to take advantage of recent innovations in cargo transportation.

In the early 1970s advances in container and freight transportation technology forced shipping companies to commit large sums to capital investment in order to stay competitive. In response to these developments, the French government undertook a reorganization of the nation’s merchant marine. As part of the restructuring, it decided to merge Messageries Maritimes and Transat—two maritime carriers in which the state held controlling interests and that were heavily in debt—to form a single large transportation company under complete government ownership. The merger was announced in December 1973, and under its terms, CGMF was formed as a holding company with control over both of the older companies. In 1976 CGMF was reorganized so that the cargo transportation assets of Messageries Maritimes and Transat were merged into a single subsidiary, Compagnie Genérale Maritime (CGM). Another subsidiary, Société Nationale Corse Mediteranée, was formed to oversee the holding company’s majority stake in Genérale Transméditerranéene, which had been nationalized.

After the merger, CGMF expanded into refrigeration, making substantial investments in ships that could carry refrigerated cargo. This new venture, combined with France’s connections with its former colonies in the West Indies, paid off by drawing business from banana planters who used CGMF container ships to transport their crop to Europe. At the same time, however, CGMF proved quite unable to turn a profit for an entire fiscal year. The company was hobbled by debts that it had to take on in the mid-1970s in order to modernize its fleet. A general decline in freight transportation rates also proved damaging to its financial health.

CGMF, in fact, had yet to declare a profitable year when Claude Abraham, a longtime civil servant who had achieved some notice for negotiating landing rights in New York for the Concorde jet, became president in 1982 (he was appointed chairman in 1984). Under Abraham, CGMF began to cut costs through layoffs and early retirements. During the mid-1980s nearly 2,000 seamen and 500 shore-based personnel were let go. At the same time, the company used its government subsidies for capital investment and to help cover severance payments. This restructuring paid off in 1988, when CGMF posted its first-ever profitable year, netting F 94 million after losing F 228.1 million—excluding its government subsidy—in 1987.

Its newfound financial health gave CGMF the confidence to think of expanding operations under its own name. In pursuit of such autonomy, it extricated itself from some of the consortium agreements through which it had previously done business. It had already withdrawn from the Gulf Europe Express consortium in 1984 and began serving the Gulf of Mexico and South America under its own name soon thereafter. In 1989 CGMF broke up Pacific Europe Express, a joint venture with Incotrans and began service to the West Coast of the United States on its own. Later that year, it sold its 22.2 percent stake in Atlantic Container Line to Transatlantic Shipping and made plans to serve the United States East Coast in a joint venture with the American company Kerr Steamship.

Such consortia and joint ventures are essential to maritime transportation companies that wish to maintain a broad geographical range of operations; they make economies of scale and frequent sailings possible. But the more tightly bound of these alliances also require that individual companies surrender their autonomy over marketing decisions. Under Abraham’s stewardship, CGMF became dissatisfied with such constraints. Within Atlantic Container Line, for instance, the company found the decision-making process—which tended to produce compromises that no party found entirely satisfying—cumbersome. CGMF also criticized the consortium’s arrangements as too rigid to permit CGMF to integrate its North American operations into its own around-the-world network. Confident after turning its first annual profit, the company felt the time had come to strike out on its own.

But expansion and sustained profitability proved to be elusive for CGMF. In 1989 profits fell to F 58.5 million, due in large part to depressed rates and increases in container and inland transportation costs. Hurricane Hugo also hurt CGMF’s bottom line when it struck the Caribbean island of Guadeloupe, disrupting the banana trade and damaging company vessels at anchor in the area. In 1990 the company posted a loss of F 174.1 million, bedeviled by the slowing world economy and rising operating expenses. 1991 proved even worse, as CGMF announced a staggering F 445 million deficit, including a F 140 million provision for restructuring costs. The company’s finances were hurt in part by disruptions of international trade caused by the 1991 Persian Gulf War.

In May 1992 CGMF tried to slow the continued flow of red ink when it announced that it would terminate most of its North American operations by the end of the year. Freight shipping rates for carriers serving the North Atlantic had been falling, and although the North American market accounted for only 10 percent of the company’s revenues, it also produced 30 percent of its losses. The announcement gathered much attention; CGMF had been serving North America for 137 years, ever since the first Pereire steamship made the journey from Le Havre to New York.

Claude Abraham also made it known that CGMF would need funds for a major recapitalization. He had been issuing such warnings for several years, and speculation flared briefly in 1989 that the company would be sold, at least in part, to private investors. In 1992, however, Abraham’s utterances on the subject became more urgent, and CGMF formally requested a capital infusion of more than F 1 billion from the government. The government refused, however, being strapped for funds itself and distracted by a dock workers strike.

In July 1992, two months before the expiration of his ten-year contract to head CGMF, the government fired Abraham, ostensibly because of his inability to stem the company’s growing losses. He was replaced by Eric Giuily, a civil servant who had once held an executive post with the Chargeurs transport group, but whose most recent position was head of the government-owned Antenne 2 television channel. Giuily took over CGMF at a time of obvious distress. The worldwide recession was dampening international trade, his company was bleeding money, and its sole shareholder had just fired the only chief executive who had ever led it to profitability. Still, Giuily’s first major initiative at the helm of CGMF was to announce a cautious expansion of its operations between Europe and Latin America. The future remains uncertain for this company that once rode the back of France’s dreams of empire. For one thing, it has never been able to wean itself off of sizeable government subsidies. But in the early 1990s CGMF at least seemed confident enough to embark on a modest program of expansion.

Principal Subsidiaries

Compagnie Genérale Maritime (99%); Société Nationale Maritime Corse-Méditeranée (80%); Société Finistérienne de Cabotage; Messigaz (60%); Westeuropa America Linien; CGM Benelux; CGM Holdings Ltd; CGM Italia (97%); Compagnie de Navigation d’Orbigny (89%); SEAS; Compania Naviera Independencia; Compagnie Genérale de l’Atlantique (51%); Sagemar; Vascomaritima (85%); CGM Portugal (55%); Transatlantique USA; Corsica Marittima (95%); Sté Frangaise de Transports & d’Entreposage Frigorifiques (81%); Sté des Glaciéres et Frigorifiques de St. Nazaire (54%); Entrepôts Frigorifiques de Kergroise; Entrepôts Frigorifiques du León (55%); Compagnie de Distribution Physique; Mazinter (97%); Tétraco; Genérale de Manutention Martinique; Genérale de Manutention Guadaloupe; Sté de Travaux Industriéis & Maritimes (95%); Manutention Genérale Méditeranée (66.5%); Genérale de Manutention Portuaire; Financiére de l’Atlantique SA (65.24%); SCI Bruges Con-teneurs (51%); SCI Rue Duphot; SCI Jeanne d’Arc; SCI Brea; Atlantique Développement (90%); SOFIDOM I (79%); SOFIDOM II (85%); SOFIDOM III (80%); SOFIDOM IV (80%); Sté Havraise de Manutentions Maritimes (98%); Cié Maritime Frangaise (99%); Atlantique SA; Internationale Fruchtimport Weichert (80%); Cié Genérale de Tourisme & d’Hótellerie (98%); Sotramat; Ferrytour; Sté Aubagnaise de Restauration et d’Approvisionnement (80%); Chais de la Transat; STIM Services; Assistance Technique & Manutention; Site du Vin; Maintenance Arrét Technique (65%); SATA; Brigantine de Navigation; Minfos (98%).