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Rumour: Will France try to change ST management?

Posted: 07 Mar 2008     Print Version  Bookmark and Share

Keywords:speculations  top management  acquisition 

Now that the French government has acquired another 2.85 per cent stake in STMicroelectronics NV, a question is being raised: Will France try to oust Carlo Bozotti, chairman and CEO of ST, and ask for a French person to take the lead? No, insisted ST's supervisory board in a statement.

However, as when a football club chairman gives backing to the team manager, or a politician gives full support to a colleague, doubts remain.

"Following the speculations that have appeared in the media concerning possible changes in the highest levels of the top management of ST, the supervisory board of the company states that these are without foundation," ST said in a statement issued Tuesday (March 4).

Report says
This follows a report in French magazine LUsine Nouvelle that Thierry Breton, ex-French Minister of Economy, Finance, and Industry (2005 to 2007), might succeed to the position of chairman and CEO of ST. The magazine indeed stated that Thierry Breton could "soon" dethrone Bozotti and that a board meeting could "soon" take place to ratify his appointment.

Breton was the chairman and CEO of French electronic equipment company Thomson SA from 1997 to 2002 and of France Telecom from 2002 to 2005. He has also served on the boards of directors of companies such as Schneider Electric, Orange SA, Groupe Bull and Bouygues Telecom. He joined Harvard Business School as a professor of management.

ST's management team is now composed of 12 members, including at least five Italian citizens and only French citizens. After France's acquisition of shares, a board-level shuffle might be expected to rebalance the representation of shareholders.

France's recent moves to support local manufacturing appear to be in line with a different strategy to that pursued by Bozotti during his tenure in the top job at ST. Bozotti has clearly stated the intention to move ST towards a fab-lite model, in which less manufacturing is done internally and more is sent to foundries. For instance, in an analyst conference in the fall of 2007, Bozotti declared: "In 2008, and at that time the company will be without the Flash Memory Group, we will move progressively to a level of outsourcing 15 to 20 per cent. At the end of next year or at the beginning of 2009, we will be at about 20 per cent."

The fab-lite strategy goes against the interest of shareholding states, which intend to maintain jobs on their soil and foster R&D activities in the field of nanoelectronics. Two facts tend to support the idea that France intends to take ST's strategy in hand.

Two factorsBR>First, the French government announced last Feb. 27, that it had agreed to provide subsidies for ST's sites in Crolles and in Grenoble, France. This decision followed an in-depth analysis of the group's development program for the period 2008 to 2012, submitted in July 2007.

Second, and on the same day, the office of French President Nicolas Sarkozy announced that the French government had bought 2.85 per cent stake in STM from Finmeccanica SpA for about Rs.1,504.86 crore (260 million euros). This transaction is intended to preserve ST's "independence and shareholding stability, while promoting its long-term development as well as its role in the nanotechnology sector in France," the government said in the statement.

Note that the statement originated from the Elysee Palace, not from the office of the Minister of Economy, Finance and Industry. This could be interpreted as a demonstration of Sarkozy's firm intention to defend flagship French industry and national champions.

Modernising France
France has recently faced several factory closures, reopening a debate on the wisdom of France's progressive deindustrialisation and development of its service sector. With an unfailing determination, Sarkozy has shown his intention to use taxpayers' money to modernise French manufacturing sites.

"I like factories, it is my thing," stated President Sarkozy mid-February on a visit at Alstom. "Our objective is to keep factories open in France because a country without factories is a country that no longer has an economy," declared Sarkozy on a visit at Arcelor-Mittal in February.

Is Sarkozy taking a wise bet, considering that the French state coffers are in the red? Is Sarkozy's reason for living to fight for so-called lost causes? Or, is Sarkozy simply putting on a good show on the eve of municipal elections in France? Wait and see.

- Anne-Francoise Pele
EE Times-Europe

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