Alcatel-Lucent may be the giant failure that France needs to succeed

Alcatel-Lucent may be the giant failure that France needs to succeed
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With the exception of Thomson Reuters’ Global Innovation report, not many institutions would put Alcatel-Lucent in their “top 100” of anything these days. A Google search for the name brings up countless financial blogs wavering on whether the company will close down this quarter or next quarter, and the recent announcement of a 15,000 employee-layoff plan (about 20% of the company’s staff as of the end of 2012) is just the latest nail in the coffin.

Let me quickly say that I think Alcatel-Lucent is an amazing company, that represents the extents of French innovation in the technology space; it also represents the extremes of France’s problems with commercialization of R&D, as well as, once again, inflexible labor environments. The company, which announced just 900 of its 15,000 layoffs in France, was met last Tuesday with more than 1,500 hundred French employees protesting in Paris.

On the one hand, you’ve got Hervé Lassalle, the CFDT delegate, one of France’s largest labor unions which represents Alcatel-Lucent employees, saying that the employees will “try to extract concessions from [CEO Michel] Combes in talks starting this month.” On the other hand, you have the CEO saying the following:

“This company could disappear.”

That’s a quote from Combes speaking publicly on Europe 1 radio last week. Do you see a difference in tone?

Combes has warned that the company’s 6th restructuring plan since 2006 – yes, the company has restructured & laid off employees 6 times in 7 years – will likely be the last; saying he’s confident that restructuring will work would be a stretch, given the previous statement.

France needs a crushing failure

Looking at the monumental disconnect between what the CEO is saying about the company, and what the CFDT is hoping to “extract” from the company, it looks like the last nail in Alcatel-Lucent’s coffin will not be that it “missed key technological shifts,” as the CEO said, nor that investors have lost confidence in the stock: it will be the obstinence of labor unions and their inability to realize that large companies – those seeming unkillable, infinitely replenishing grandes entreprises – can die.

Alcatel-Lucent’s bankruptcy/solvency/failure would show that, despite what all discourse in France would suggest, it is not the Government & the grandes entreprises who are at the will of the syndicats, but the syndicats who are at the will of companies. Because, should Alcatel-Lucent die, that would mean that labor unions were unable to uphold their one promise to their clients/users/customers (employees) – that they would make sure that employees remained employed.

France needs a Hierarchy reboot

When you don’t work in France, it’s hard to put your finger on exactly what is holding France back: the banks, or the ‘overbearing’ government, you might say. But anyone who digs down deep enough realizes that, today, the entire country is run by labor unions. The taxi industry recently fought and won their push for the 15-minute law because they threatened to block traffic with their taxis in a protest. Titan International CEO Maurice Taylor refused to buy a Goodyear factory in France because he didn’t want French employees and the burden that goes with hiring in France.

The same way that money rules the United States, Labor Unions rule France.

If Labor Unions had less power over the government, it could loosen labor laws.

If Alcatel-Lucent can die, then Labor Unions lose their power – it’s as simple as that.

6 Responses

  1. Avatar
    Jean-Marc Loingtier

    Hello Liam,

    As much as I love your posts, this one seems to be lacking an essential remark: entrepreneurs are often using unions and social protests as springboards to get more in terms of public funding … It’s not just a disconnect from reality, it’s a whole ecosystem whose elements are much more comfortable with each other than the apparent cleavages would let one assume …

  2. Avatar
    Pierre Chapuis

    Alcatel Lucent is also the symbol of how France got everything wrong in the last 15 years

    Former CEO and chairman Serge Tchuruk is the person I consider personally responsible for the ruin of Alcatel and, in part, the French tech economy. In the early 2000s he decided hardware should not be produced in France and started closing factories. *All* the factories. He laid off thousands and outsourced offshore, turning Alcatel into a “R&D only” company.

    At the time, Tchuruk was incensed by the tech / eco press and emulated by his peers. But outsourcing production completely is *never* a good idea. I have no example of a company succeeding with this strategy. In Alcatel’s case, the result is obvious: competitors from countries where production is *actually* done (Huawei…) are killing them on their core markets.

    On top of that, Alcatel merged with Lucent in 2006. Lucent (like Alcatel) is a company with a great legacy, but a large merger between two companies with competing products based on very different technologies was a dangerous bet that failed. As far as I know they never successfully adapted the software to merge the product lines, and even if they did it cost them a lot and came too late.

  3. Avatar
    Mathieu Gosselin

    Good point, that might spark a debate in France.

    I think overall there’s a disconnect in the mind of french people into what makes the economy running.
    Most french people don’t really have that understanding of how in the private domain either a company is competitive or it fails. Each one have try to protect its own little interest without seeing the whole picture. If it succeed syndicates would want to piggyback on it, but if it fails too. We have to bring back a bit of balance.
    French still haven’t drank the whole capitalistic cool aid. And that’s somewhat good we retain that but on a global scale makes us lose, cause the world turn a certain way without minding our opinions.

  4. Avatar
    Daniel Tiramani

    Alcatel is NOT going out of business, you wasted your time writing this article.

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