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The French-based electrical household appliance manufacturer, Moulinex, which was bought out in 2000 by the Italian group Elfi and merged with Brandt, has been slipping further and further into financial crisis since the start of 2001. Following the restructuring of Moulinex's industrial operations in late April 2001, involving 4,000 job cuts, the company decided to file for bankruptcy. In late October 2001, Moulinex was looking for a buyer and was on the brink of court-imposed liquidation.
Since the mid-1980s, Moulinex- the French-based electrical household appliance manufacturer - has experienced a wave of redundancy plans. Under the management of its founder, Jean Mantelet, the company failed to anticipate the economic slowdown which hit in the early 1980s, and from 1985 onwards its losses began to mount up. That year, the first of the redundancy plans led to 1,300 redundancies and the retirement of Mr Mantelet. A business policy focusing on microwave ovens – an area where the company faced competition from Asian manufacturers - and a strategy based on the takeover of other companies, such as the luxury coffee-maker specialist Krups in 1987, meant that the company found it hard to pull itself out of the red. Losses continued to mount.
In 1990, the Moulinex group's debt burden stood at EUR 350 million and successive recapitalisation initiatives did nothing to turn this situation around. In 1994, a new redundancy plan resulted in the company shedding 1,500 employees and closing two plants. In 1996, when Pierre Blayau took over the helm of the company, providing a cash injection of EUR 150 million, the company's losses stood at EUR 107 million A new redundancy plan was developed, with the loss of 2,400 jobs. The impact of this redundancy plan was offset by the implementation of a reduced working week under the 'Robien' law (the 1996 legislation which encouraged working time reductions and reorganisation to create or save jobs - FR9705146F).
Operating results moved back into the black in 1997-8. However, the Asian economic crisis in 1997, the 1998 economic crisis in Russia (Moulinex's second largest market) and the slide of the Brazilian currency (a country in which Moulinex had made acquisitions) resulted in a renewed slump in the company's fortunes. In 2000, a new redundancy plan was developed (FR0003148N). Against a background of consolidation and production relocation, Moulinex was bought out in late September 2000, by the Italian group Elfi, which already owned Brandt. A merger of Brandt and Moulinex took place in December 2000, with Patrick Puy becoming chief executive of the newly-created entity.
The merger was endorsed by most trade unions represented at Moulinex - the General Confederation of Labour (Confédération générale du travail, CGT), the French Christian Workers' Confederation (Confédération française des travailleurs chrétiens, CFTC), the French Confederation of Professional and Managerial Staff-General Confederation of Professional and Managerial Staff (Confédération française de l'encadrement-Confédération générale des cadres, CFE-CGC), the General Confederation of Labour-Force ouvrière (Confédération générale du travail-Force ouvrière, CGT-FO) and the independent Workers' Interest Defence Union (Syndicat de Défenses des Intérêts des Salariés, Sydis), which was formerly affiliated to the French Democratic Confederation of Labour (Confédération française démocratique du travail, CFDT). However, it was opposed by CFDT.
Slide accelerates in spring 2001
On the 25 April 2001, Mr Puy tabled a restructuring plan and a redundancy plan to the company's board, providing for the shedding of 4,000 jobs worldwide - including 1,500 in France and 1,700 in Poland - out of a combined workforce of 22,000, 50% of whom are based in France. He presented the same plan to the French central works council on 26 April 2001. The plan provided for the closure of three plants in France and a further four elsewhere in the world. At the time of the announcement, Mr Puy stated: 'the goal of the plan is to balance the books by 2003 and, to move into a profit-making situation of 3% to 4% of turnover by 2005.' The company's debt burden then stood at EUR 760 million on a turnover of EUR 2.5 billion. Moulinex had to find sources of funding to finance the cost of restructuring estimated at EUR 200 million.
The trade unions decided to respond by using the courts. On 17 May 2001, the central works council authorised its secretary, by 13 votes out of 14, to request a court-authorised expert appraisal 'in an attempt to obtain all the information pertaining to the economic, legal, accounting and management operations underpinning the company's current economic and labour relations situation'. Only CFDT refused to participate in the vote. The members of the central works council believed that the former management team had indulged in management irregularities in order to foster the Moulinex-Brandt merger. Consequently, the Nanterre High Court (Tribunal de Grande Instance) ordered the appointment of a expert to assess the economic situation resulting from the merger.
The expert report was submitted to the central works council on 16 July. It severely criticised the management's rescue plan. Some experts called on, in particular Cabinet Secafi Alpha, considered that 'the measures put forward failed adequately to address the human and economic issues.' They recommended retaining two plants and repositioning manufacturing on mid- to high-range product lines. They thus advocated a 'redefined innovation policy'. However, management opted instead to implement its plan in its original form with only minor amendments.
From filing for bankruptcy to the threat of court-imposed liquidation
In early September 2001, in light of the fact that no new financial backing had been forthcoming, the Moulinex board announced that it intended to file for bankruptcy. The management had counted on backing from the banks, an increase in capital by Elfi and the divestment of assets to fund the rescue plan to the tune of EUR 200 million. However, Elfi, the main shareholder, went back on its decision. Consequently, the Nanterre Commercial Court (Tribunal de commerce) appointed two receivers for a six-month period in an attempt to work out a solution and to find backers. The government, for its part, indicated that it would provide assistance to Moulinex in order to limit the social and employment repercussions.
Only two companies submitted takeover bids for parts of the Moulinex group - Fidei, a 'financial group specialising in buying out ailing companies', and SEB, a direct Moulinex competitor. Both groups were mainly interested in Moulinex's division making small electrical appliances. SEB proposed taking on 4,250 of the 8,835-strong workforce of the small electrical appliance division. It planned to retain only three plants in their entirety and refused to take over Brandt. Fidei, on the other hand, proposed to shed 3,500 employees, or 1,100 fewer than SEB, but also rejected any buy-out of Brandt. Neither of the proposals was supported by the trade unions. In early October, Euroland, a Quebec-based investment fund, offered to take over Moulinex-Brandt as a whole, to provide a cash infusion of EUR 2.2 billion and to avoid mass redundancies. However, it was unable to prove that it had the financial resources required to fund its proposal. It should also be noted that on 5 October 2001, the banks enabled Brandt to resume business activity.
The court-imposed liquidation of Moulinex seemed increasingly likely at the time of writing (late October 2001), since the receivers deemed the takeover bids insufficient. The Nanterre Commercial Court, however, granted additional time to allow a takeover bid to be finalised.
Trade union approach to the crisis
From the beginning of the Moulinex crisis, the trade unions have organised numerous demonstrations condemning the announced redundancy plan. Local elected officials and residents have also been involved. The unions have used all the possibilities open to them (the courts, expert opinion, alternative plans and picketing plants) to fight the plan. They have also lobbied the government to urge the banks to free up the required funding to bail out the company. They have met with the Ministers of Economy, Finance and Industry on several occasions. However, while it appeared in late October that Brandt was on the verge of obtaining a bail-out, Moulinex still had its back to the wall.
However, there are major difference of opinion between the trade unions, particularly between CFDT and CGT, which leads the multi-union coalition at Moulinex (CGT, CFTC, CFE-CGC, CGT-FO and Sydis). CFDT has twice disagreed with the other unions, first by rejecting the Moulinex-Brandt merger, which resulted in a CFDT delegate being expelled from the Moulinex board to be replaced by a CGT one, and then by voting against asking the courts to allow an alternative expert appraisal of the restructuring plan developed by Moulinex management. In-fighting among the trade unions is nothing new at Moulinex, where CFDT was the majority organisation until the 1980s.
Nevertheless, the critical situation at Moulinex prompted all the trade unions to demonstrate together on 5 October 2001 and to request government intervention to save the company.
Commentary
The fate of Moulinex hangs on a decision by the courts. If no buyer steps in in the near future, Moulinex will be forced to close down completely. This would lead to redundancies on a scale that has not been seen for over 10 years. Closure would be a failure for the trade unions, local elected officials and the government (just a few months before the general and presidential elections), which have been unable to change the position of shareholders and the banks. (Simon Macaire, IRES)