adaptability of the French armaments industry in an era of globalization, The

Industry and Innovation, Aug 2001 by Serfati, Claude

A "defense need-oriented industrial logic"

The configuration of the FMSA basically remained the same from the 1970s to the early 1990s. In January 1996, the restructuring process which was launched by President Chirac, aimed at beefing up the national champions which had been built during the 1960s. Basically, the consolidation plan covered four sectors, nuclear, ground weapons, electronics and aerospace. The latter two were of most concern, since the former two were already organized with one single company monopolizing the production, DCN in the naval industry," GIAT-industries in the ground industry The emphasis put on the leading role held by government in defense industrial issues is all the more striking that for one decade successive governments-Left and Right alternating in office between 1986 and 1995-had strongly advocated for a reduced governmental involvement and a higher role given to the "market". Comparison with how the process ran in the USA highlights some institutional differences. In the early 1990s, the consolidation of the US arms industry was initiated by the Department of Defense, convening the business leaders in a series of meetings ("last supper meetings"). Nevertheless, as the role of the Pentagon should not be overlooked, it was Wall Street that shaped the way the consolidation proceeded (Markusen 1997). This makes a difference with France, where consolidation can be seen as an outcome of a political decision-making process, which does not mean that industrial lobbying did not exist (Markusen and Serfati 2000).

From the very beginning, it was clear that the government's only concern was to preserve the capacity of the French arms industry to remain a key actor in Europe, whatever the cost might be for civilian industrial activities. The electronic sector is a case in point. The Juppe government decided to proceed with a total separation within Thomson S.A. (parent company) between Thomson-CSF (military activities) on the one hand and Thomson Multimedia (electronic appliances) and SGS-Thomson (electronic components) on the other. The government also announced that it would dispose of Thomson Multimedia by giving it free (allegedly because of its level of indebtedness) to the Korean conglomerate Daewoo. This decision was reversed by the Privatization Commission some months later, and a few months before the Asian financial crisis put severe pressure on the Korean chaebol, and on Daewoo in particular, which came close to bankruptcy. What was not taken into consideration in the planned sale of Thomson Multimedia was that the company might bounce back into profitability-which indeed it did subsequently. Eventually Thomson Multimedia was floated on the stock market. Also, even at the time of the planned acquisition by Daewoo, various indications made it clear that the Korean company was in a less than sound financial position than announced by its chairman. Were the acquisition to come about, closures of plants and laboratory centers in France would have had to occur, causing havoc to domestic civilian technological capabilities. Indeed, the basic thrust of governmental industrial policy was epitomized by the Prime Minister, when he announced his decision in favor of Matra (and Daewoo) before National Assembly members: "The decision we made was based on a defense need-oriented industrial logic" ("Notre choix a ete fonde sur une logique industrielle de defense") (October 16, 1996). Notwithstanding the maintaining of domestic capabilities in electronic appliance after the failure of the Daewoo takeover on Thomson Multimedia, the lack of concern by policymakers for the promoting of military-civilian technological integration was evidenced some months later, when the newly elected Prime Minister Jospin (gauche plurielle) confirmed at the end of 1997 the total split of Thomson S.A. between its military and commercial divisions. This story is anything but anecdotal since Thomson had been the "national champion" in electronics appliances, concentrating in its operations the bulk of national technological capabilities since the end of the 1970s.