22 April 2003
A Gallic industrial icon disappeared last month when Jean-Luc Largardère died on 14 March, age 75. Largardère was one of the most multi-faceted empire-builders France has seen in the last 50 years.
That empire lies at the heart of Europe and includes aerospace, publishing, automobiles, and more. It is worth €13 billion and employs 45,500. Matra and Airbus are probably the most prestigious names in the portfolio. For trained as an engineer, he was the model, symbol and soul of the aerospace sector, and played a key role in development of these activities for the last four decades. Without him there would be no EADS (European Aerospace and Defense Systems) or Airbus.
But Largardère’s uncommon energy took him far afield: to Formula One competition and Renault, to racehorses, Virgin Megastores, the Ariane launcher, Canal +, radio – the list goes on.
French political and business leaders joined in their eulogies. President Jacques Chirac called him “a tireless entrepreneur who will be remembered as a great captain of French industry, turned toward Europe and open to the world.”
Former Prime Minister Laurent Fabius said, “They call him a captain of industry, but he was really a general – one of those Napoleonic generals formed on the battlefield.”
Noted Francis Mer, ministry of economy and finance, and former CEO of Usinor, “He had all the talents of the entrepreneur: engineer, manager, visionary. He was always ahead of his time.” “One of the greatest entrepreneurs in our history,” added Michel Pébereau, president of BNP Paribas.
[*D Charasmatic helmsman *]
Lagardère’s character mixed admiration for Louis XIV and Charles de Gaulle with love of sports. The result was an emblematic product of postwar entrepreneurial France who symbolized a vigorous, often impetuous younger generation and a rebirth of French capitalism. Like most industry leaders his career had ups an downs, but his popularity and charm never dimmed.
“His death deprives our country of one of its most charismatic leaders,” said Bernard Arnault, president of luxury-good group LVMH, (Shortly after his father’s death, son and heir Arnaud Lagardère was named to the board of this group for three years, replacing ex-Vivendi boss, Jean-Marie Messier).
This high praise for his seductiveness seems to be the consensus. Recalls one ex-Matra employee, “He had tremendous charisma. You left any meeting where he spoke feeling like you were lucky to be working for the greatest company on Earth.”“He showed the example himself, galvanized his collaborators, and always gave them the chance to surpass themselves,” recalled Mr Arnault.
His charisma affected even those who lost their jobs with him. Lagardère died just as 40-year-old Matra Automobile was being restructured and all but closed down. The decision, announced last Feb. 26, led to the closing of factories in central France and put 1,200 people out of work. But while payroll workers were marching past the town hall to protest the plant’s shutdown on Mar. 15, they observed one minute of silence for their boss at the same time. Some 1,500 were present, according to press reports.
These workers told reporters they recalled Lagardère fondly, remembered meals he had shared with them in earlier days, as well as his passion for cars. “I was impressed by the way he always wanted to go all the way,” said one employee. “A lot of the former staff told me that if there was any hostility toward him on this protest march today, they would leave.”
Born in 1928, Lagardère took his diploma in electronic engineering, and at 23 embarked on the career path that looked most promising after the war: aeronautics. In 1952 he entered Marcel Dassault Aeronautics, staying 10 years.
Matra, created in 1945, was at that time a small specialist in electronics defense and missiles. Its founder also owned radio station Europe 1. Both were eventually controlled by Lagardère.
He became director general of Matra in 1963, then president in 1977. The following year he posted profits of €13 million, with a turnover of €2 billion – 20 times the 1963 figures.
During the 1970s he closed many lucrative arms deals with Saudi Arabia and other Mideast nations. These countries were buying from Europe - mainly France – at the time, using then-abundant petrodollars. As missiles became smarter, Matra’s electronics components were increasingly sought-after. The weapons trade practically made Matra.
But arms cash dried up in the 1980s, and Matra’s expansion was over. Lagardère began a major restructuring of the organization, ahead of the trend that was to hit all European industry. He became a sort of advocate of European unity, spreading the word to industrialists and politicians across the continent: restructure, cross borders, or die.
[*D Media mogul *]
In the media however, growth was still on. He was passionate about publishing, and understood what media power was. The story goes that he was waiting outside a minister’s office one day to discuss missiles. One of the political reporters at Europe 1, which he now owned, arrived after him, but was ushered in first. “That day he grasped the fact that for politicians, the media counted more than entrepreneurs,” says his biographer, Alexandra Schwartzbrod.
He had taken over Europe 1 in 1974; in 1980 he bought Hachette, and built an empire around magazines. Today no newsstand in the world does not stock one of his 222 titles, which include Elle and Paris-Match. The group distributes 1 billion copies in 34 countries and turns over €2.4 billion. Hachette is the reference in the feminine press with nearly 70 titles, but scholastic and literary magazines are also part of the family. He was France’s number-two publisher until last October, when he bought Vivendi Universal Publishing for €1.2 million, which put him in the top spot – number three in Europe and fifth worldwide.
When he acquired three national networks, becoming second in French radio broadcasting, he had two of the three media he craved; only television still lacked. France was liberalizing its airwaves at the time, as were Italy, Spain, Germany and other countries in Europe, and state-owned stations were up for sale. He wanted one. “It’s my responsibility to make Hachette Europe’s number-one audiovisual group in the 21st century,” he said in 1986. He never got the channel he craved, government-owned market leader, TF1, which went to an outsider, French construction magnate Francis Bouyges. Revenge came in 1990 when he took 22 percent of La Cinq, a new private channel. Shareholders included Silvio Berlusconi and press baron Robert Hersant (Le Figaro). But La Cinq went bankrupt one year later and was off the air by 1992.
“La Cinq was my biggest failure,” he admitted. “I was on my knees.” The flop cost €550 million and shook the financial foundations of his empire. But Lagardère bounced back, merging Matra, where money was plentiful, with Hachette, operator of the defunct channel.
Media and communications account for two-thirds of the group’s turnover today. Yet TV remains the empire’s missing link. Strategy for the coming years is television, particularly thematic channels, it is said, and some predict the group will emerge as powerful here as elsewhere.
Lagardère kept enlarging his portfolio. He outfitted the city of Lille with a transport system, diversified with watchmaking (Jaz, Yema) and took over auto-parts manufacturers (Jaeger, Solex), all companies in difficulty at the time. He was interested in everything, and his kingdom reflected this. He maintained relationships with politicians of every stripe, from rightists like De Gaulle and Chirac, to socialists such as François Mitterrand, inspiring some to compare him to Giovanni Agnelli.
When the French left came to power in 1981 it nationalized many industries, taking 51 percent of Matra. When the right returned in 1986 with Chirac and unraveled these nationalizations, Lagardère’s affinities with the French president were the reason he was able to have his business reprivatized first – despite other government voices eager to sell one-third of it.
Ten years later he was selected to lead privatization of Thomson-CSF (today Thales), another flower of French electronics. Before his appointment was confirmed, he announced he would sell the mass-market division to a Korean firm. This was not well received, and a Privatization Commission refused to approve his nomination. After two crushing blows, his star now seemed on the decline.
[*D Restructuring European aerospace *]
But he rebounded. Aerospace, his home turf, saved him, along with his capacities as dealmaker. The Germans and British were trying to get hold of Airbus by merging British Aerospace with DASA, the German space agency, which would leave the French partner, Aérospatiale, a minor associate with 38 percent. Lagardère rode to the rescue.
In Feb. 1999, he got government approval for a merger of two long-standing French rivals, Matra and missile maker Aérospatiale. He held 33 percent of the new entity, now number five in the world, a nice coup. But he didn’t stop there.
Immediately afterward, he managed to spoil the Anglo-German union by persuading the latter to join the new company, Aérospatiale/Matra, now to be called EADS. Born in Sept. 1999, EADS integrated Aérospatiale/Matra, Daimler-Chrysler Aerospace and Spain’s Casa (5.5 percent). It now employs over 100,000, holds shares in Airbus, Arianespace, Astrium and Eurocopter, and reports €30 billion in turnover. Seemingly, while no one was looking, and certainly while nobody expected it, Lagardère single-handedly became the master of Europe’s new aerospace scene. Without his vision, the merger would never have happened. “His death creates a huge vacuum in Europe’s industrial landscape,” noted Jürgen Schrempp, Daimler-Chrysler’s president.
EADS and the purchase of Vivendi Publishing were his last big successes, which all but obliterated memory of La Cinq, or earlier ups and downs in automobile construction or football, where his team, Matra Racing, never lived up to expectations and was eventually dissolved.
He stands out, particularly in these times of corrupt CEOs. Of his flagship Matra, he could say, like Augustus, that he found it brick and left it marble. He took the SME and turned it into the backbone of EADS, today a rival to Boeing as the world’s number-one aerospace group.
[*D What now? *]
But his death comes at a critical time for European space and defense. Just 72 hours after his father’s decease, his son, Arnaud, faced the public as chief for the first time. His initial act was to present the group’s 2002 results - a loss of €291 million.
A morbid twist of the economic calendar required that yearly results be announced publicly on Monday, March 17 – three days after the director died and the day before Arnaud’s 42nd birthday.
Arnaud inherits an empire which his family controls with a mere 5.26 percent of shares, thanks to a rare French statute of limited partnership, called société en commandite par actions, or partnership limited by shares (SCA). This allows for control of a corporation with a wee amount of capital. Lagardère and Michelin are the only two such groups on the French CAC 40. Formed in 1992 after the débâcle of La Cinq, the arrangement protects the group from hostile takeovers and stipulates only they can name its directors.
An only son (like his father), Arnaud has been president of Lagardère Media (€8 billion turnover) since 2000, and was 10 years at his father’s side learning the profession of empire king. His father trained him to know every detail of the group and its companies before taking over the reins.
After earning his diploma in economics, he was sent to the U.S., where he directed Grolier, a publishing house the group later sold. On his return to France in 1998 he was officially dubbed heir.
His style is laid-back, and he is called a good communicator. But his political skills are untested – he lacks his father’s far-reaching connections to all parties - as are his capabilities for managing multiple activities. No one knows what kind of industrial baron he will be. But spending the last decade as his father’s alter-ego should produce something. “No decision by my father since 1998 was taken without my consent,” he told the press on 17 March.
A communications man, he has never hidden his preference for media over aerospace, and observers are speculating what his first steps will be. There is talk of withdrawing Lagardère’s 15 percent of EADS, where revenues slipped three percent last year and share price has lost 60 percent in three years. “We have prepared EADS to weather possible further deterioration of the business climate in 2003,” declared its copresidents, Philippe Camus and Rainer Hertrich. “I’ll continue and pursue my father’s unfinished work,” said Arnaud Lagardère on 17 March. Like many empires, Lagardère’s is intimately bound up with the personality of its creator. Camus and Arnaud Lagardère share power and naturally rumors have begun on a “rift” between them.
Yet the founding father’s death should not spark any brutal change in the group’s management in the short term. It is not in any financial crisis and has no need to sell off assets urgently.
Though it encompassed nearly every industry, Lagardère’s melting-pot kingdom built its success on military hardware. He took 50 years to become the major player in European defense and build a pan-European industry to rival that of the United States. European space and defense owes him a lot. There is no reason to expect this edifice to be dismantled any time soon.