France buys shipyard stake to protect jobs

Source: Business spectator
By Sophie Louet and Tim Hepher of Reuters

PARIS -- France stepped in to prevent a loss of jobs to Asia with a plan to buy up to a third of a French shipbuilding group, saying its national interests were at stake.

President Nicolas Sarkozy's government said it had acted to protect the loss of crucial marine skills as the two Chantiers de l'Atlantique shipyards -- now called Aker Yards France -- fall under South Korean control.

The French yards are 75 per cent owned by a subsidiary of the Norwegian company Aker Yards. Last year, South Korea's STX Shipbuilding bought a 39 per cent stake in Aker in a stock market raid, and has said it plans to boost its holding further.

The French government said had agreed to buy back 9 per cent of Aker Yards France from STX. The remaining 25 per cent of Aker Yards France belongs to French engineering firm Alstom, but the French government has a right of first refusal over that stake when Aker is due to buy it in 2010, so from then, it would have a 34 per cent blocking minority over key decisions.

The government said it had struck the deal directly with STX. In Oslo, Aker Yards said it was unaware of the plan.

"We are surprised to learn through the media that the French government has announced that they intend to buy a total of 34 per cent of the shares in Aker Yards France based on a dialogue with STX," chairman Svein Sivertsen said in a statement.

"We see it as unlikely that Aker Yards will sell any part of our business if the terms are not attractive for both all of our owners and for the further development of the company," he said.

A French government official, asking not to be named, said the value of the 9 per cent stake would be set by experts but predicted it would be no more than some "tens of millions" of euros.

"We see it in a positive light. With its minority stake, the state will be able to oppose certain investment or strategic choices," union representative Marc Menager said in Nantes.

Economic patriotism revisited

Last year's move on Aker shares by STX raised concerns in France about the future of 3,000 shipbuilding jobs at a time of economic uncertainty.

Unions warned of the collapse of France's last civil shipyard, whose vessels include the 1930s floating palace Normandie, once the world's largest and fastest cruiseliner. The yard also has a hand in military shipbuilding.

France has not yet decided whether to build a second aircraft carrier and may need the yard's deep docks to do so.

"This agreement preserves our national defence interests," Mr Sarkozy's office said in a statement, adding the shipyard in western France hosted skills and equipment that were vital to the French navy and which would now be preserved in France.

Chantiers de l'Atlantique historically belonged to the state and was acquired by Alstom in the 1970s.

Ministers avoided using the unpopular slogan of "economic patriotism" developed under President Jacques Chirac, but the government acknowledged it had invoked a decree which symbolised the idea and instead trumpeted a new "active industrial policy".

The decree was drawn up in 2005 by Prime Minister Dominique de Villepin, Sarkozy's fiercest rival in his own UMP party, and provoked the ire of some of France's trading partners.

Mr Sarkozy recently expressed regret that Alstom had been forced to sell its shipyards under conditions imposed by the European Union for a massive state-backed restructuring of the company which he orchestrated as finance minister.

A conservative politician who combines free-market rhetoric with industrial interventionism, Sarkozy often cites his rescue of Alstom, which made money for the state, as a model for the way governments should temper the impact of global markets.

Earlier this year he vowed to protect French businesses from sovereign wealth funds and urged a state bank to roll up its sleeves and help France defend its industrial interests.

Aker Yards shares rose as much as 6 per cent on news of France's plan.

The company's cruise and ferries division, which includes two French and three Finnish yards, posted a gross operating loss in 2007 but returned to the black in the first quarter this year.

Finnish daily Kauppalehti reported on Thursday STX may close Aker Yards' Finnish yards -- which like its French units are focused on cruise ships -- unless it secured more orders.

The high-end cruise ship business, one of the few niches of the global shipbuilding industry not dominated by Asian yards, has been plagued by delays and cost overruns at Aker Yards.

Finland's government has also signalled that it may seek to become part owner of Aker's Finnish shipyards to ensure shipbuilding remains in the relatively high-wage Nordic country.