Helsinki Congress of the International Economic History Association, 21-25 August 2006: Session 93 Equipment goods and mass brands American business spreading modernity into France? Strategies

6. French subsidiaries and the American division of labor: the French production system and the sharing of responsibility
It is not possible for us to reconstruct with any great precision the managerial structure of American groups in France. The concept of “globalization” was not as yet applicable as the move towards the “unified market” was still in its infancy and the notion of the specialization of production facilities at the European scale was not made clear. Every major corporate group, be it European or American, tended to take every large country as a market in itself. In fact, every group grew at its own pace, without there being any general trend or systematic progression. But we could try to determine the place occupied by France in the international arena or, at the very least, within the European strategy of these corporations. To begin with, it was not often that France was made into a major center at the European scale, perhaps due to fiscal considerations or its prevailing commercial laws. Thus it could happen that the French subsidiary depended on a Swiss company, as was the case for Turboplast France, Turboplast’s (established in Switzerland by American Can) French subsidiary. Similarly, in the 1970s, Hoover us (household electric appliances) used Hoover uk as the cornerstone of its European strategy: Hoover uk controlled Hoover Netherlands which, in its turn, supervised the subsidiaries in continental Europe, one of which was Hoover France²²⁶.
A. Subsidiaries which were nothing more than simple tools
Some companies were nothing more than managerial organizations which depended on decisions taken in some other country. Thus, it is hardly known that Xerox France, created in 1964, depended on the British firm Rank Xerox, itself a subsidiary since 1957 of the American Xerox and its English partner, the Rank Corporation. It was used to import, distribute and maintain equipment which was entirely imported from England. Ford France operated under the orders of Ford Germany while also distributing Ford uk products. Then in 1967, it was merged into the European entity which had its headquarters in England²²⁷. While Goodyear had two factories in France at the beginning of the 1970s, the European research center was located at Luxembourg. Dupont de Nemours chose Geneva as the seat of its European headquarters, while Dow Chemical Europe based itself at Zurich. Xerox’s European research centre (with 2,000 employees) was located in England, while the French factory was just that, simply churning out, in the early 1980s, electronic typewriters and various other office equipment without any great value addition. Gillette France was linked since the 1930s to Gillette uk, the European headquarters of the group and which was given the charge of the entire Eastern Hemisphere²²⁸ when the group underwent a major reorganization in 1952. From 1969 onwards, Air products’s subsidiary in France was controlled by the Belgian subsidiary which itself was just one of the group’s European bases, which was already well established in England and Germany. In 1960, Culligan²²⁹, the water treatment experts, established in France a simple marketing and servicing subsidiary, just as had been done by the air-conditioning specialists, Carrier. When Litton established its subsidiary and managerial seat at Grenoble in 1968-69, it’s designated role was simply to verify and supervise the material imported into Europe from the United States.
Often it happened that the new French subsidiary had to form part of an international strategy and structure determined by agents outside the country. In 1968, when Scott Paper bought over Bouton-Brochard, the French leader in tissue paper, its new French subsidiary was integrated into its pan-European company, the Scott Continental, controlled by its Belgian subsidiary²³⁰. In a similar fashion, when Burlington bought the Swiss company Schappe sa in 1968, its French subsidiary at Lyons (Argis) which manufactured ready-made jerseys was Americanised. When the Dutch firm Douwe-Egberts was swallowed by Sara Lee in 1979, it brought with it its French subsidiary Douwe Egberts France, which included Maison du Café, number two in France, and Benenuts....
This dependence on decision making centers which were located abroad resulted in France having to bear the brunt of a withdrawal strategy initiated from across the Atlantic. Already during the pre-War years, many American corporations had begun to pull out of Europe, which meant the abandoning of their French plants. Westinghouse had sold its Italian and French subsidiaries in 1914 and its English subsidiary in 1917-19. Western Electric-Att quit Europe by selling its assets²³¹ to Itt and Dupont de Nemours sold its stakes in England and Germany in 1935. After the War, General Electric chose to concentrate its investments in the United States and sold its English and French interests in 1953 – in the case of this latter, to the Dutch Philips corporation²³². The most striking event of the time was Ford’s selling of its factory at Poissy and its commercial network to Simca in 1955. Fifteen years later, General Electric suddenly gave up on its plans to construct a computer giant and sold its French subsidiary Ge Bull to Honeywell in 1970 – just before this latter too began to have second thoughts which led to an eventual withdrawal…. Finally, the return of Itt as a service company in the beginning of the 1980s meant that it had to Frenchify its subsidiaries Lmt and Cgct – all to the profit of Alcatel, which had been, for some years past, the world-wide leader in telecommunications equipment. In the meantime, the restructuring of the agricultural and plant equipment industries forced the departure of Allis-Chambers (to the profit of Fiat, and later, Case), while the crisis faced by Massey-Ferguson in the mid-1970s necessitated a restructuring of its assets in Europe. All this goes to show why there was a widespread feeling of a constant threat hanging over the subsidiaries in Europe and why trade unions and the authorities were loath to see French companies fall into American hands.
B. Subsidiaries which had some room for commercial maneuvering
Having said that, it must also be noted that for a long time, despite the creation of a European hierarchy, as had been done by Ford in Great Britain in 1967 or, for that matter, by other multinationals including Philips and Unilever, every national sub-group had its own identity and largely controlled its own destiny, in its own internal market as well as any foreign markets that it managed to conquer. It was a kind of “pluri-national model” which functioned without any great cohesion or economies of scale. The French entities of American multinationals had a varied range of hierarchical levels. Many of them were simply marketing and servicing subsidiaries, forming a part of us commercial ventures in Europe, at the same level as many other such subsidiaries established in other countries. All were completely dependent on the International Department of these multinationals, without any autonomy nor any national distinctiveness. Thus, at the beginning of the 1970s, Levi’s France marketed clothes made in factories located in Belgium and Scotland. Nevertheless, some of these subsidiaries could win some measure of autonomy, as compared to other such companies of the group, to the extent that their directors proved themselves by posting impressive growth figures. Such was the case with Singer France in the second half of the 1960s, when its president Jacques Ehrsam directed it as though it were his own company. Similarly, when Gillette’s sales began to level off, it was forced, in 1971, to decentralize some of the power wielded by Gillette uk and to endow each of its other subsidiaries the responsibility of marketing and formulating their own commercial policies, and thereby to adapt themselves better to the psychological and sociological aspects of their individual markets²³³. This was especially needed because, in France itself, a redoubtable competitor emerged in the form of the use-and-throw Bic shaver (1974). And thus in the 1980s, the stage was set for Gillette France’s chief executive officer, Jacques Lagarde, to take his cue and prove his mettle. Later on, the drive towards globalization meant implementing a unified marketing strategy built around a single organization which would operate at the European scale – but that happened only in the 1980s.
Even though the European technological center was headquartered at Brussels since 1963, and in spite of the fact that most major innovations originated from the United States, Procter & Gamble France benefited by the policy of maintaining a country to country management which allowed it some maneuvering space regarding the design of the packaging and even for designing new products adapted to the French market. Thus in 1958, it introduced Bonux, a product which was available only in France, with advertisements which pictured mothers (washing clothes by hand – this was before the launch of Bonux Machine in 1976) with their children and the caption: “Washing – a piece of cake.”²³⁴ Ariel appeared on the scene a little later: “In 1966, the research and development department of Procter & Gamble France informed the head office of the discovery of a new family of chemical substances, the enzymes […]. After seven months of testing in the department at Seine-Maritime, Ariel was launched.”²³⁵
It was thought at that time that a unification at the European level would be impossible and that the peculiarities of every market would remain a permanent feature of the European landscape. When in 1963, Nabisco’s name appeared on the wrappers of Gondolo biscuits, sales were affected because consumers feared a deterioration in the quality of their favorite product…. In fact, from 1965 onwards, Nabisco deliberately maintained Belin’s autonomy – while discreetly adding its logo to the packaging.
C. Subsidiaries endowed with some measure of autonomy and which had developed strong personalities
Some companies enjoyed a large degree of autonomy due to their being given a decisive role to play in the European domain of their American parent corporations or in their division of labor. That was the case with Caterpillar, whose two factories at Grenoble (the first of which was established in 1961), formed part of the group’s European set up which had been formerly controlled from England²³⁶. As one of the four production centers in Europe, they produced (with the help of 1,300 employees in 1965, which rose to a maximum of 2,500 in 1975 before being reduced to 1,700 in 1983) a range of construction equipment of which two thirds were exported²³⁷. A similar division of European production facilities was also implemented by Timken, who had two factories in Europe, one in Great Britain and the other in France, at Colmar. John Deere, the second largest producer of agricultural equipment in the world, also followed a similar policy: in 1962, it established an engine factory at Orléans which supplied a tractor factory at Mannheim in Germany as the company could not survive solely on the French market (in which it had only a 6 per cent share in 1967) – this despite the fact that it had established three of its six European factories (and 24 worldwide) in France. In 1970, Clark Equipment expanded its factory at Strasbourg, which was one of the four pillars of its deployment in Europe, along with the two factories in Germany and a third in Belgium. The merger of the agricultural and plant equipment branch of Fiat with John Deere in 1971 gave rise to ten factories in Europe, including four in France. Nabisco used Belin as its European research centre thanks to the establishment, at Château-Thierry, of a technological biscuit research center (the International Training & Research Centre) which functioned both as a laboratory for developing new biscuits, a demonstration workshop for the European subsidiaries and as a training ground for their managers and technicians²³⁸. While the Uniroyal brand was for a time remotely controlled from Belgium (where Us Rubber had bought over Englebert in 1958 before unveiling its flagship brand) the subsidiary Uniroyal-Englebert France grew to become an important production center²³⁹. More importantly, it was turned into the main research center of the entire group for the study and implementation of radial tires. The technological advantage enjoyed by Michelin was such that the management felt it necessary to draw inspiration within France itself to save what was then the third American tire conglomerate. Ascinter-Otis too, as we shall see later, formed a similar, informal company.
Sometimes companies were left almost entirely independent, endowed with decision making capabilities and their own research and exporting options. This was the case with the Itt group’s subsidiaries in France, the Cgct and Lmt – we shall deal more at length with the Itt group later. Besides its factories in Great Britain, Germany, Italy and Belgium, Itt wanted these two to come together as a quasi-independent body, with full technological and commercial autonomy and an independent market. It thus did not integrate itself in the group’s European network till 1972, when its directors began to attend the monthly meetings held by the group at Brussels. The European major in auto parts, Dba (Ducellier-Bendix-Lockheed-Air Equipement), was also given a large degree of autonomy at the European scale in order to deal effectively with clients who had themselves grown to span the continent, like when it bagged Ford’s contract for the supply of brakes. During the 1970s, Dba turned into a redoubtable research & development center with 350 technicians in its plant at Drancy, and helped to Frenchify its parent company’s patents. It was gradually given greater and greater autonomy and in 1974-1975, was made head of all Bendix subsidiaries in Europe. It marked the emergence of a “globalization” at the European level as the French company then went on to establish, in 1970, its own factory in Germany (at Sarrebrück) to explore the German market.
In the course of time, several American corporations turned France into a major center of their European manufacturing operations. In May 1967, United Fruit chose Paris as the headquarters of its European subsidiary (mainly for importing its Chiquita brand of bananas). In 1970, the Timex Corporation exported one million of the 2.5 million watched produced by its factory at Besançon. Similarly, in 1981, Hewlett-Packard’s French subsidiary found itself the hub of the company’s “production system” in Europe. It employed 2,000 of the 9,500 employed by the company in Europe (and 64,000 worldwide), it had impressive research capabilities which developed the French version of its application software and also helped in developing industrial data acquisition systems. Moreover, a full 80 per cent of the production from its factory at Grenoble-Eybens²⁴⁰ (opened in 1971) was exported. Texas Instruments’ French subsidiary became the heart of its technological and manufacturing system in Europe: “Our mos laboratory for the whole of Europe is in France, at Villeneuve-Loubet, near Nice.”²⁴¹ “Four sister-concerns are being managed from France […] in Italy, in Germany, in England and in the Benelux countries.”
In the second half of the 1960s, MacKinsey handed over the reins of four other European branches to its Paris-based office, albeit under the management of an American (John Macumber). Though Manpower had launched in 1956 its European network of franchises²⁴² in Great Britain, Manpower France was established in 1957 as an independent entity, part of the franchisee, but controlled and managed by its founders and directors under Michaël Grunelius. It turned out to be so successful (it accounted for one tenth of the entire group’s turnover) that in October 1968, its parent company asked it to restructure the group’s entire European network around Manpower Europe, of which it controlled 51 percent while Grunelius himself owned 49 per cent and held the post of chairman and chief executive officer. Manpower Europe’s management moved to Paris, at the headquarters of Manpower France, and though it was controlled by the European entity, it still had a large degree of autonomy, reinforced by the fact that it retained for itself the assets of the franchisees in Norway and the Netherlands. The power of the Parisian seat lasted till 1973, when Manpower bought over Manpower Europe as part of its global reorganization drive. Grunelius was retained as the director of Manpower France which reverted to the “pluri-national” control system as it remained a “fully francized American.” “A French subsidiary of an American group, our directors from Milwaukee had, right from the start, been very satisfied with our results and have never interfered in our management, giving us complete freedom. The choice of the managerial team and our operating rules are entirely French.”²⁴³
D. Frenchmen at the head of American corporations?
It was in the years 1970-1980 that we saw the phenomenon of managers being promoted to the top spot in American multinationals after having proved their mettle by steering their group to success in the international arena²⁴⁴. Before the globalization of management in the 1990s, it was rare indeed to find Frenchmen rise to take the helm of American corporations. All the more reason then to look more closely at the exceptions and take stock of the qualities which distinguished these Frenchmen. We have already mentioned M. Grunelius who was made head of Manpower Europe for four years. Georges Héreil, president of Simca, a major force in the automobile sector and in industries in general, rose to become vice-president of Chrysler International in May 1966 when the company stepped into France. Pierre Clavier, the chairman and ceo of Texas Instruments France in 1964 was rewarded for his success and made Coordinator of International Activities of the group at Dallas²⁴⁵. When the French subsidiary of Scm Smith-Corona-Marchant began to account for 55 per cent of the profits posted by the entire European operations of the group, Christian Simon was made director of Scm Smith-Corona-Marchant Europe in December 1969. Similarly, Jean-Claude Delafon, chairman and ceo of Xerox France was promoted to the Xerox board, and more notably, made director of its European subsidiaries in 1970. But the most famous of these Frenchmen turned vip managers “à l’américaine’’ was Jacques Maisonrouge. Starting from managing Ibm affaires in eleven countries of Europe and Africa, he rose to become the rank of deputy ceo for Europe in 1959 and the company president for Europe, Africa and the Near East in 1964. In May 1967, he was invited to sit on Ibm’s board and was made president of Ibm World Trade Corporation in October 1967; true, the post was more administrative than executive, but it carried some weighty responsibilities regarding the process of homogenization within the multinational group. Similarly, in October 1969, Pierre Lemonnier, president of General Foods France and Italy was promoted to the vice-presidency of the international division of this world leader in the agri-food business and ceo of General Foods Europe. He was as much of an entrepreneur as a manager as it was he who had founded the Cafés Legal company which he sold to General Foods in 1959. At a lower level, Yves Nadal, President of Knoll France (furniture) since 1956, was made vice-president of Knoll International in 1966 while Jacques Lagarde, the ceo of Gillette France was promoted as head of the dental hygiene division in the United States in 1986. In the 1990s, he went on to become the executive vice-president in charge of diversification. In 1972, Michel Bergerac, French by birth and naturalized American, was made ceo of Itt Europe and vice-president of Itt, practically at the same level as Harold Geneen²⁴⁶, while another director, Henri Busignies (also a naturalized American), became vice-president in charge of scientific research.
Evidently, the economic laws of a capitalist market necessitate the granting of some strategic autonomy to the various entities of a multinational corporation. They must create their own markets at the European level and thus must have the freedom to choose the country for their base of operations. They can also choose to withdraw, as Ford did by selling its French factory and network in 1954, or Allis-Chalmers, which sold its French assets in the mid-1960s. As chance would have it, the years 1950-1970 were years of economic expansion and therefore of new factories and warehouses, which saved foreign companies from the negative effects of the closures, as it happened later with the restructuring which took place in the 1980s and 1990s. The belated advent of a “globalized” and a unified European management meant that it could not take full advantage of the economies of scale. But the technological and industrial superiority of the American brands seemed to give them a sufficiently large margin to make up for this. Apart from the merger between John Deere and Fiat Equipment in 1971, it was only in the 1980s that the fragmented managerial system was put under the spot when some American groups began to have second thoughts, especially in the construction and agricultural equipment sector (Massey Ferguson, etc.).
7. An estimate of the American economic clout in France in the years 1950-1970
While a quantitative analysis of the investments made by American corporations in France is possible, comparisons on the European scale are difficult to come by.
A. The domination of key sectors in the 1960s
As soon as the Common Market took shape, American corporations began to include France in their European expansion plans. Soon enough, France rose to the third spot (behind Great Britain and Germany) in terms of American direct investments, with 11.5 per cent of the total investments made in West Europe in the 1960s. The American domination was clear in all the branches where its technological superiority in the production of industrial goods was most evident. The entire engineering sector, Telephony and the electric works were thus riddled with American corporations. The same held true for the automobile and agricultural equipment industries as well as for the consumer goods sector thanks largely to sewing machines. But as for the “American way of life”, it made its presence felt only in the automobile (Ford, Chrysler) and biscuit industries (as already seen).

Poids du capital américain dans l’industrie française en 1962-1964 (en pourcentage^247)
	France	Rfa	Royaume-Uni
Calculateurs électroniques	75
Machines à coudre	70
Biscuiterie	70
Matériel téléphonique	60
Tracteurs et machines agricoles	35		55
Pneumatiques	30		45
Raffinage de pétrole	20	35
Machines-outils	20	30
Construction électrique	20
Construction automobile	13		65

In many cases, it was a failure on the part of the French capitalist system which allowed the Americans to establish their bridgeheads on French territory. Often it was the non-transmission of an enterprising spirit within family owned businesses, or the desire to shift sectors which allowed the Americans or investors from other European countries to buy them out. In 1963, Coty, the perfume company, faced difficulties because of its directors and was bought by Pfizer. In 1968, Scott Paper seized a controlling stake in Bouton-Brochard, leader in the French tissue paper industry, which thereby lost its family owned status.

Indice de pénétration de l’industrie française par les États-Unis en 1970 (part des firmes américaines)^248
	Workforce	Turnover	Investments
Fabrication de machines agricoles	20,5	25,9	15,5
Pétrole et carburants	19,7	23	19,6
Construction électrique et électronique	12,9	19,3	42,6
Matériel de transport	10,8	11,2	12,3
chimie	9	10,4	6,6
Mécanique de précision	6,7	10,3	9,5
Construction navale	6,7	7,1	4
Caoutchouc-amiante, transformation des matières plastiques	5,9	10,1	11,2
Corps gras et produits amylacés	5,1	6,3	8,3
Grosse et moyenne mécanique et équipement ménager	4,5	6,5	4,4
Fabrication de machines-outils	3,4	4	4,5

In any case, the 1960s saw France becoming more and more attractive²⁴⁹ – from grabbing a fifth of all American investments in the industrial and oil sector in 1960, it increased its share to one fourth in 1970, behind the two-fifths poured into Germany²⁵⁰ – though it is true that it could not make up for the late start it had made compared to some other countries.

Répartition des investissements américains dans le Marché commun (six pays)^251
	France	Rfa	Italie	Pays-Bas et Belgique
1958-1963	20,8	52,1	13,1	14
1970	23,8	42,4	13,1	20,7

Total des encours d’investissements américains par pays^252 en 1970 (en milliards de dollars)
Royaume-Uni	8
Allemagne	4,6
France	2,59
Italie	1,55
Belgique et Luxembourg	1,53
Total dans les pays développés	53,1

The United States was by far the largest capital investor in France in the mid-1960s.

Pays d’origine des investissements étrangers en France effectués à la date de décembre 1964 (en millions de dollars)
États-Unis	2 500
Grande-Bretagne	850
Pays-Bas	650
Belgique	470
Suisse	200

The statistics regarding the division of investments confirms our empirical estimates: the Americans penetrated deepest and made most use of their relative technological advantage in the “heavy” industries.

Indice de pénétration des entreprises américaines en France : poids par rapport aux effectifs de chaque branche d’activité en 1971 (en pourcentage)^253
	Poids des entreprises américaines	Poids de l’ensemble des entreprises étrangères
Machines agricoles	20,5	37,6
Pétrole et carburants	19,7	42,8
Constructions électrique et électronique	12,9	26,2
Matériel de transport	10,8	18,7
chimie	9	20,4
Construction navale	6,7	15,5
Mécanique de précision	6,7	16,9
Caoutchouc, amiante et transformation de matières plastiques	5,9	13
Corps gras et produits amylacés	5,1	29
Grosse et moyenne mécanique et équipement ménager	4,5	8
moyenne	4,6	10,7

At the same time, it must be made clear that the American penetration was not an all-out success: as regards the number of employees, American firms accounted for only a twentieth of the total industrial manpower. Though it must also be said that this represented fully half of number employed by foreign investors. Moreover, these enterprises come well ahead of all other countries in terms of turnover and amounts invested.

Indices de pénétration selon les pays en 1971 (pourcentage)^254
	effectifs	ventes	investissements
États-Unis	4,6	7,2	8,2
Marché commun à six	3,5	5,3	5,4
Royaume-Uni	1,2	2,1	2,4
Total des pays étrangers	10,7	16,1	16,9