Nationalizing Companies Is Part Of The French DNA

Wolf Richter's picture

Wolf Richter

In France, socialism isn’t a political movement that swept the elections this year, and it isn’t an economic philosophy that moved once again to the forefront, but it’s part of the DNA of much of the population. And it produces classic knee-jerk reactions to the current economic morass—such as the nationalization of tottering automaker Peugeot.

French automakers are in a death spiral, within a market that is morose. In October, auto sales fell 7.8% from prior year, and a breath-taking 15.8% once the two extra selling days this October (23 instead 21) are taken into account. Year to date, sales are down 13.3%.

PSA Peugeot Citroën dropped 5% for the month and 17.2% for the year. Its captive finance subsidiary, Banque PSA Finance, was bailed out by the taxpayer last week to the tune of €5 to €7 billion. More bailouts are on the horizon. Layoffs loom, but political resistance is enormous, and it might be impossible to shrink PSA’s capacity down to reality.

Renault crashed. October sales were down a catastrophic 26.4%, for a decline of 20.5% so far this year. All hopes rest on the arrival of its miracle car, the new Clio 4, which would not only stimulate Renault’s sales but goose the entire market. Good luck. In a few days, the company will start discussions with unions on how to improve its “competitiveness”—and everyone knows what that means for the hapless workers.

The killer? In October, the French brands together plunged 15.2% ... but foreign brands rose 2.5%. For the year, the market is down 13.3%, a horrid figure, but PSA is down 17.2% and Renault 20.5%. They’re getting killed at home! You can blame the decomposing market on the government or on the debt crisis or on the weather, but if your market share is plummeting, you can only blame yourself—and if you don’t fix the problem, you become irrelevant.

Hence the ingenious idea to poll the French on what they thought about nationalizing Peugeot. Not bailing it out. Not resurrecting it from a pre-packaged bankruptcy, as the US had done with GM. But nationalizing it upfront. It would turn the manufacturer into a political entity. Layoffs would become impossible. As would success. And the French DNA spoke:

Overall, 56.7% were either for nationalizing it or didn’t care (32.2% and 24.5%). Only 43.3% were against it. Among workers, 64.8% were either for it or didn’t care (51% in favor, 13.8% shrugging it off). Even among managers and professionals, 33.7% were for it, though 58% opposed it, and only 8.2% didn’t know.

While the government is grappling with the crisis that has washed over France [Desperate French Government Threatens To “Requisition” Vacant Buildings], almost a third of the population sees nationalization as a solution, and a quarter of the population doesn’t mind.

If it weren’t for EU rules that pried open markets, carved up national monopolies, and introduced competition, many of the largest French corporations would still be owned by the state. Yet, lots of vestiges remain—in a country where the central government’s big footprint amounts to 56.3% of GDP (2013 budget).

Air France, for example, was “privatized,” but even after its merger with KLM, the government still owns 18.6% of the group. Renault was privatized in 1996. Crédit Lyonnais, once the largest bank in France, was majority owned by the state when it almost went bankrupt in 1993; it was acquired by Crédit Agricole in 2003. EDF is still a state-owned mega utility that owns, among other things, all of France’s 58 active nuclear reactors. Any suggestion by intrepid politicians of taking some baby steps towards privatizing it can trigger strikes, and sometimes a few cables mysteriously get cut. You don’t joke about privatizing EDF.

France Telecom was privatized in January 1998 under Socialist Prime Minister Lionel Jospin. Resistance was huge, and only a Socialist could overcome it. But then came the stock offering. I was living in France at the time. It was one heck of a hoopla. Shares were hyped for months. Everybody wanted a piece of the pie. It was the dot-com bubble, even in France. The stock soared. In March 2000, it hit €219 a share, and people felt rich and smart. It now trades for around €11. Employee suicides have become a problem. And the government still owns 27% of it ... and names the CEO. Because it’s in the French DNA.

But, good grief, I shouldn’t nag. In my beloved California, politicians tax like the French, Chriss Street writes, though the state, like France, is already suffering from wealth and business flight. And now Governor Brown is threatening with a doomsday scenario to raise taxes again. Read.... California’s Brilliant Political Shake-Down Move.

And here is my edgy, seat-belt mandatory novel about car salesmen, their toxic language, their managers, their shenanigans, and their efforts to stay alive in their nasty world. Read the first few chapters of TESTOSTERONE PIT for free on Amazon.

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Zero Govt's picture

"The stock soared. In March 2000, it hit €219 a share, and people felt rich and smart. It now trades for around €11."

Hells Bells!!!

What (the Hell) happened to France Telecom Wolfy? 

Did their market collapse further through the floorboards than the current French car market is doing this year. How? How does a national monopoly, semi-privatised or not, drop like stone with a captive market (to milk) in place

max2205's picture

Can't To get old so I can bitch about the govt all day

dinastar2's picture

Well as long as the taxpayer pays the taxes this money has to go somewhere.By nationalisation, the french govt.( either left or right which are very close ) are socilaizing the losses. in Good times they privatize the public companies in favor of their cronies , in bad times they just spread the losses all ove the taxpayers. Call it socialism , call it making a joke of good governance, it was possible and was done many times.The real question is now when the national debt is at 86% of GDP and the foreign investors are NOT WILLING ANYMORE TO LEND MONEY because the CPI at 4% per year just eat their 3%/year marginal gain.

THE DORK OF CORK's picture

Anyone who thinks that EDF should have become a limited liability company back in 2004 is either crazy or corrupt.

It has not produced a single reactor either at home or abroad since then - with Finlands reactor turning into a labour saving neo liberal disaster zone.

q99x2's picture

Four wheeled public transportation system.

Totentänzerlied's picture

Nationalization is (by definition) part of socialist "DNA".

Azannoth's picture

Yes but if you're smart about it you do it like the Germans, take a private Enterprise pass a law(or regulation) making it effectively a State sanctioned/sponsored Monopoly than offer retiring politicians and favored lobbyists "jobs" on the boards of those companies while fleecing taxpayers for tens of billions a year by making it mandatory to use their services or having to pay them anyway even if you're not directly using their services, I call it German efficiency and prudence.

GEMA(Takes a royalty every time some1 listens to music in Germany)

GEZ(220€ a year for "owning" a TV or radio, even if you don't really own one)

TÜV(Mandatory 2 year motor-vehicle checkups)

DB(German National Railways)

Krankenkassen(Semi-private health insurance)

none of the above(and many more like them) are offically taxes but you end up paying them anyway

etc. etc. the list contains virtually every aspect of commerce in Germany

THE DORK OF CORK's picture

Meanwhile on the last 1 meter gauge railway not mainly used for tourism ( its used for the school run etc) they have been lucky to get some spare steel from TGV Atlantique.

Cost of project : 13.6 million.


This video  shows the Labour rather capital intensity of the rail line  i.e. under the franc it would be viable.

This is a investment in the commons.......but most of SNCF resourses go into fancy high speed stuff.


The largest town on the line has a interesting industrial car history. (pop : 18,353)



"For 150 years, the brothers Normant factory was installed in the Faubourg Saint-Roch, it spread over six hectares on the edge of the Sauldre, employing up to 1500 people in its workshops 13 . This large family drapery business has provided the industrial development of the city, before closing its doors in December 1969 14 , a victim of the serious crisis affecting the entire textile sector 15 .

The factory Matra produced for Renault in 1980 and 1990, nearly 870,000 units of the Renault Espace . It was closed in 2004 by its owner, the Lagardère Group , following the slump model Renault Avantime . Matra factory was demolished and cleared in 2011-2012, and has been replaced by a real estate project, including the construction of housing (such as the site of the former goods station). However, plant parts remaining, employing 110 employees, it also assembles electric bikes.

The city hosted 1959 to 2000 a factory of cameras professional associations, institutions Beaulieu . The factory premises now house a museum of automobile.

The city has a branch of the Chamber of Commerce and Industry of Loir-et-Cher .

A project to build a village name "Le Carré des Marques" is now under consideration. Proceedings before administrative courts are under"


Half of this line will remain closed  - 86 million would rebuild the entire line with money to spare.


THE DORK OF CORK's picture

A 86 million Euro Turkey ?ômes

"Opened so early Saturday, May 26, 2012, the new cog train was stopped for an indefinite period the afternoon to17  h  30 following a storm causing mudslides on rails and water the stations of departure and arrival. Some tourists were stranded a few hours at the top and halfway before being discharged 4 . The operation finally restarted June 16, 2012, after completion of repair 5 .

October 28, 2012, a train without passengers derailed on a switch and flipped at the intersection. The General Council of the Puy-de-Dôme request the suspension of operations "


6 .


This is a private investment yet..........

Funding edit ]

This is not a investment of the commons


ebworthen's picture

Glad you mentioned California, because the U.S. Government has essentially nationalized the TBTF banks, two automakers, and an insurance company.

The various iterations of QE are sleight-of-hand nationalization of equity markets, and record millions on SNAP (Food Stamps) are nationalization of profits of corporations like WalMart and Tyson Foods.

Urban Redneck's picture

I don't think the 1.4 trillion in G(overnment spending) out of a total GDP of 2.8 trillion (USD) fully takes into account the GDP contributions of all the French Companies operating under the long arm of the State.  I think if someone went through and did a full GAAP analysis that the footprint of the French State would amount to a LOT more than 56.3% of GDP.


Major French Government "Investment" vehicles (I might be missing a few)'investissement (not open for business YET)

French Budget Data (State, Local, Social Security)

Volaille de Bresse's picture

In 1981 Mitterand nationalized large companies... only to discovery they were in an abyssal condition. CEOs had not made the necessary investments to keep them up to date with the European competition.


Mitterand injected loads of tax payers' money into these firms, then in 86 when the Right won the elections Chirac and Balladur de-nationalized them and sold them to their friends...

The scam of the decade! The joke that was around in France was French tax payers had invested so much money into Renault each of them deserved a FREE car ;-)

Wolfd you got it wrong once again : fat crooked cats LOVE nationalizations. After several years they are given back a new-looking debt-cleaned company (bastards!).


THE DORK OF CORK's picture

Well you nationalise the money supply not the companies.......or the banks.

A weaker franc would mean the car Industry would stop moving east although it would be a much smaller industry.


The euro is a gigantic capital export engine seeking pointless returns from labour arbitrage games. - the collapse of investment in countries such as Turkey & Russia will then reduce the $ price of oil.


The euro car industry is moving east - spending real capital setting up new factories when it has a tighter shorter supply chain at home.

The car industry wishes to somehow keep the Ponzi alive - reducing wages in the major markets while increasing the credit leverage so as to sustain demand.


They can only have a viable national industry when they have a national currency.

Which may mean people can only afford to buy & run a 2CV.

lolmao500's picture

Well of course. 25% of the French vote Communist, 65% vote socialist and 10% vote fascist.

falak pema's picture

Wolf forgets that in the USA post 2008 crisis, the US government DE FACTO nationalised the TBTF banks and GM. A huge subsidisation of FIRE and CAR economy, including the RE Fanny-Freddy riot brigade. 

In fact it was the most hypocritical of nationalisations; they allowed them to be totally subsidised by state BUT still retain their private ownership so as to distribute their subsequent dividends/MEGA BONUSES to private shareholders; all the while the state and the tax payer had bailed them out!! 

I prefer a more forthright type of nationalisation where the government RUNS and OWNS the nationalised company, if it does nationalise it, rather than letting it go belly up. Not that I subscribe to saving Oligarchy firms just for the fun of crony capitalistic reasoning.

So in USA land the DNA of their government is to socialise the debt and privatise the profit...?

Right WOlf?

Ghordius's picture

I fully agree with the above - the most hypocritical of all nationalisations, with instant privatization

BattlegroundEurope2011's picture

When they start Nationalizing Gold then bring the guillotines out.

Ghordius's picture

I HATE when people write things this way

"Overall, 56.7% were either for nationalizing it or didn’t care (32.2% and 24.5%). Only 43.3% were against it."

So again (if true): Overall 43.3% against nationalization. 32.2% for nationalization. 24.5% don't care. Sounds different, eh?


"Among workers, 64.8% were either for it or didn’t care (51% in favor, 13.8% shrugging it off)."

And again (if true): Workers 35.2% against nationalization. 51% for nationalization. 18% don't care. So only half of those workers are "rabid socialists".


"Even among managers and professionals, 33.7% were for it, though 58% opposed it, and only 8.2% didn’t know."

And here (if true): Managers 58% against nationalization. 33.7% for nationalization. 8.2% don't care. So many for?


taken together for easier comparison:

Overall   43.3% against nationalization. 32.2% for nationalization. 24.5% don't care.

Workers  35.2% against nationalization. 51% for nationalization. 18% don't care.

Managers   58% against nationalization. 33.7% for nationalization. 8.2% don't care.

IMHO a subtly different picture.

StychoKiller's picture

Man, WHY isn't stupidity really painful?

Parrotile's picture

From a purely Aussie perspective, whilst Peugeot make glamorous vehicles, they are neither particularly reliable nor durable, and often need "Peugeot Main Dealer" maintenance, which Down Under equates to quite a rip-off price wise.

We are still only getting a 3 year warranty from Peugeot (even Holden offer 8), when most non-European cars that the "average person" buys (i.e. excluding the glamorous stuff such as Mercedes and BMW) tend to come with 5 years minimum, usually 8, often with significant warranted mileages (e.g. 200,000km).

And, with fuel costs on the rise, the economy of comparable models puts them at a disadvantage to newer-entrant Far Eastern manufacturers such as Hyundai, Kia and even Great Wall, which offer equivalent (or better) MPG performance for less outlay, and lower servicing costs.

There was a rumour that Peugeot were planning to "offset" their losses by increasing the cost of essential branded parts - in effect penalising existing owners over and above their already above-median purchase prices (for comparable models / makes). Nothing concrete on this, but it does make one wonder.

goldfish1's picture

Certainly nationalizing the oil companies makes sense to me.

boogerbently's picture

Nationalizing Goldman-Sachs, Citi, JPM....

makes sense to me. I mean, we ALREADY paid for them.