The French government decided last Friday to temporarily nationalise the French shipyard STX. What does it mean and does it signal a willingness to intervene in other sectors, like container shipping?
Bruno Le Maire, French economy minister, has wilfully avoided to use the word nationalisation. In his terms, this is the deployment of preemption rights to temporarily take 100% control of the shipyard, just before a deal negotiated by the previous Hollande government would become active: namely the transfer of 67% of the shares a South Korean firm to the Italian shipyard Fincantieri. The deployment of this preemptive right should be seen as a temporary move to make sure that Italians would not own more than 50% of the shares of STX.
The Anglophone business press was quick to criticise the French move. “Macron’s first faux pas“, “protectionism”, “dirigisme”! In other words: the irrepressible tradition of the French state to meddle with the economy. In my view this assessment misses the point: the move does not seem to me the reappraisal of a dominant role for the state in the economy, but rather a repositioning in reaction to “aggressive mercantilism” of other states.
This is not a yoghurt company, this is a shipyard that builds aircraft carriers – and the only shipyard able to build the world’s largest cruise ships. Cruise ships are at the high end of the shipbuilding industry, generating much more revenue per ship than almost any other ship. Fincantieri has signed agreements with China to start building cruise ships in China, a country that has the ambition to become a leading shipbuilding nation in all ship types. So there might be a risk that strategic know-how will leak away via Italy to China. As Le Maire mentioned in his press conference on Friday: “we need to give guarantees to the French that our exceptional know-how does not leave the borders of the European Union“.
Will container shipping be next?
The Turkish business man Robert Yildirim has announced that he wants to sell his 24% stake in the French container shipping company CMA CGM and he has hired the China Citic Bank to find buyers. We argued earlier that this is a golden opportunity for the Chinese state-owned company COSCO to achieve its ambition to become the largest container shipping company – and few would think the Chinese stop at a 24% share. What would become of Marseille, France’s second largest city, if CMA CGM would become Chinese? And more immediately, even a Chinese minority stake in CMA CGM would bring its terminal subsidiary Terminal Link under Chinese control, considering that China Merchants Holdings (another Chinese state-owned company) already has 49% of its shares. Terminal Link controls various port terminals, including in major French ports. One might imagine that the representative of the French sovereign wealth fund – that saved CMA CGM during the financial crisis – sitting in the board of CMA CGM will feel uneasy about the Chinese interest. The case of STX signals a possible roadmap for the sale of Yildirim’s shares.
The discussion on how open market economies can affront aggressive mercantilists not playing with the same rule-book, is not reserved to the French. Germany recently expanded its powers to block foreign takeovers in its strategic sectors. Macron proposed a common approach towards foreign investments during a European Council meeting in June. However, the financial crisis and the EU’s own response to seem to have driven some sort of a wedge in a possible common European approach: although Germany supported the proposal, there was pushback from countries like Spain and Greece, afraid that this would scare away foreign investors. (Not surprisingly, these are the two countries in Europe were the Chinese have managed to acquire considerable container terminal assets). The position of Italy might be pivotal in this discussion. Italy presents a very interesting target for China and Italy could gain from Chinese investments if a right balance between risks and benefits is found.
There has been some political posturing during last week on French and Italian side. Beyond their current conflict, both France and Italy might have an interest in finding common ground in order to come to a coordinated European approach to the challenges of expansive state capitalism. Maybe something to solve this week?