International marketing

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Moulinex, the French-based electrical household appliance manufacturer, started in the early 100's with Jean Mantelet and a few employees who made hand-held mashed potato grinders. With limited technology at the time, the company eventually became very innovative. They began to distribute their grinders all across France and neighboring countries. Their reputation for quality lead to the company becoming infamous for many other kitchen appliances. Many of this included kettles, food processors, and pressure cookers. For the next 60 years Moulinex continued to put comfort in their products first, using its expertise to offer homemakers a different and improved lifestyle. Always a step ahead, Moulinex successfully created innovative and attractive household appliances to meet the changing needs of the modern household (www.moulinex.com).

During the early twentieth century, Moulinex was at the head of the French homemaking industry. Yet, since the mid-180s, Moulinex has experienced a wave of redundancy plans. Under the management of its founder, Jean Mantelet, the company failed to anticipate the economic slowdown of the early 180's (Macaire, Simon). From 185 onward, its losses began to mount up. That year, the first of the redundancy plans led to 1,00 lay offs, and the unfortunate retirement of Mr. Mantelet. In 10, the Moulinex groups debt burden stood at EUR 50 million, and a restructuring of management and marketing procedures did nothing to turn this situation around. The company took on almost a dozen different general managers during the early nineties (Macaire, Simon).

In 14, they introduced another new redundancy plan, which would result in the company shedding 1,500 employees and inevitably closing two plants. In 16, Pierre Blayau took control of the company and provided cash inoculation of EUR 150 million. However, the companys losses still stood at a staggering EUR 107 million. Blayau introduced yet another new redundancy plan, in which ,400 jobs would be lost (Hege, Agelheid). Conversely, the impact of this redundancy plan was offset by the implementation of a reduced working week. Meant to save jobs, the reduced workweek encouraged working time reductions and reorganization. However, the Asian economic crisis in 17, and the 18 economic crisis in Russia, which was Moulinexs second largest market, resulted in a renewed slump in the companys profits.

Against a background of consolidation and production relocation, the Italian group Elfi, which already owned Brandt, bought out Moulinex in late September of 000 (Hege, Adelheid). The merger of Brandt and Moulinex into the Moulinex-Brandt Corporation took place in December 000, with Patrick Puy becoming the new chief executive. The merger was meant to pull the company out of the gutter. Instead, it entered back into the spotlight. The merger was greatly endorsed by most all trade unions represented at Moulinex including; the General Confederation of Labour, the French Christian Workers Confederation, the General Confederation of Labour-Force ouvrière, and the independent Workers Interest Defense Union (Macaire, Simon). The support of the unions made the change easier and more appealing to the employees who feared for their jobs. However, it was opposed by CFDT, who felt that the merger would just increase the amount of debt onto the company.

On the 5 April 001, Mr. Puy introduced a restructuring/redundancy plan to the companys board that would shed almost 4,000 jobs worldwide (Husson, Michel). This would include 1,500 jobs in France and 1,700 jobs in Poland, out of a combined workforce of only ,000. He presented the same plan to the French central works council the next day. The plan provided for the closure of three plants in France, which housed fifty percent of Moulinex's employees, and four more plants elsewhere in the world. At the time of the announcement, Mr. Puy stated, the goal of the plan is to balance the books by 00 and to move into a profit-making situation of % to 4% of turnover by 005 (Husson, Michel). The controversial plan seemed doomed from the beginning, nevertheless something had to be done about the companys debt burden, which now stood at EUR 760 million. Moulinex had to find sources of funding to finance the cost of restructuring, which was estimated at EUR 00 million. The trade unions decided to respond by using the courts. In early 001, the central works council authorized its secretary to request a court-authorized expert appraisal. It was in an attempt to obtain all the information pertaining to the economic, legal, accounting, and management operations underpinning the companys current economic and labor relations situation. The members of the central works council believed that the former management team of Moulinex had indulged in poor management procedures in an attempt to promote the Moulinex-Brandt merger. Consequently, the Nanterre High Court ordered the appointment of an expert to assess the economic situation resulting from the merger. The expert report, which severely criticized the managements rescue plan, was submitted to the central works. Some of the experts called on, considered that the measures put forward failed adequately to address the employee and economic issues. They, in turn, recommended retaining two plants and repositioning manufacturing on mid-range to high-range product lines advocating a redefined innovation policy (Husson, Michel). However, management opted instead to implement the plan in its original form, with only subtle adjustments.

In early September of 001, in light of the fact that no new financial backing had been impending, the Moulinex board of trustees announced that it intended to file for bankruptcy (www.moulinex.com). 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. However, Elfi, being the main shareholder, went back on their previous decision to increase capital. Consequently, the Nanterre Commercial Court appointed two receivers for a six-month period in an attempt to work out a solution and to find backers. The government 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. One being Fidei, a financial group specializing in buying out ailing companies and the other SEB, a direct Moulinex competitor. Both groups were mainly interested in Moulinexs division of making small electrical appliances, which had great potential of turning over an economic profit (Hege, Adelheid). SEB proposed to keep 4,50 of the 8,85 workforces, to retain only three plants of the company's plants, and to refuse to take over the Brandt division. Fidei, on the other hand, proposed to shed ,500 employees, 1,100 fewer than SEB, but also rejected any buy-out of Brandt. Needless to say, neither of the proposals was supported by the trade unions.

In early October of the same year, Euroland, a Quebec-based investment fund, offered to take over Moulinex-Brandt as a whole. They would provide a cash infusion of EUR . billion and avoid mass redundancies (Husson, Michel). However, it was unable to prove that it had the financial resources required to fund its proposal. Thus, on October fifth of 001 the banks enabled Brandt to resume business activity. From the beginning of the Moulinex crisis, the trade unions had organized numerous demonstrations condemning the announced redundancy plan. Local elected officials and residents had also been involved. The unions had used all the possibilities to fight the plan even lobbying 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 bailout, Moulinex still had its back to the wall. The trade unions continued to battle within each other, causing more diffusion than within the actual boundaries of the company. CFDT had 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. Nevertheless, the critical situation at Moulinex prompted all the trade unions to demonstrate a government intervention to save the company. The fate of Moulinex hung on a decision by the courts. If no buyer stepped in, Moulinex would be forced to close down completely. This would lead to unemployment on a scale that had not been seen for over a decade.

Many companies such as Arcelic-Beko of Turkey, Candy of Italy, Elco of Israel and Whirlpool of the US all bid on Moulinex, which filed for bankruptcy in September as part of the collapse of Moulinex-Brandt. Court-appointed administrators decided to deal separately with Moulinex and Brandt, which came together less than a year earlier when ElFi, the Italian owner of Brandt, bought Moulinex. Moulinex had 11,000 employees, but the focus remained on the fate of its 5,00 workers in France. None of the bidders were keen to buy much more than its domestic operations.

Elco offered to invest Euros 100m over two years in Moulinex, guaranteeing jobs for 4,00 Moulinex workers in France. This was the most generous offer in terms of employment, and one that received warm welcome from French labor unions. The offers were difficult to compare, but Elcos rivals hoped commercial logic, rather than employment considerations would prevail. Arcelic-Beko, a subsidiary of Koc, offered to keep ,100 jobs in France and invest Euros 500m over two years. Candy planned to maintain ,100 jobs and invest Euros 140m over three to four years. Whirlpool wanted to save ,00 jobs and invest between Euros 150m and Euros 00m in the first year.

The Moulinex decision was in the hands of administrators, but the government took a keen interest in the process. The government wanted a strong industrial partner for Moulinex, but it wanted just as much to avoid another round of social unrest at this sensitive time, according to one insider. Moulinex generated more interest from potential buyers than expected, justifying the decision to handle Brandt and Moulinex separately.

However, the French market had been growing at an average 5 per cent a year over the past five years, and Moulinex has some prized assets. In particular were its cookers, and its top-loading washing machines. The fiasco that took place since the bankruptcy announcement proves that the appliance industry is very competitive throughout the world and consolidation is probably needed in order to allow more of these companies to prosper.

In the appliance world toady there are numerous competitors, making the market almost impossible to deal with. Basic economics teaches one that to reach the long run equilibrium an entity must battle through the ups and downs. Yet, as noted earlier Moulinex has unsuccessfully battled for years upon years. That is due to competitors such as, Whirlpool and General Electric. Since the September solvency of the Moulinex group, other appliance manufacturers saw great gains. Whirlpool, for example, saw its stock price rise from about 5 in mid-September to over 75 today. That's almost a fifty percent increase in price over the last twelve months. Sales for appliance manufacturers picked up worldwide following the Moulinex bankruptcy. Most sources credit the success of other appliance companies to the drop in consumer confidence in the Moulinex brand. However, in the last quarter, following the SEB buyout of Moulinex and Krups, the Moulinex brand name started back on the right track.

SEB, the French household appliances group, saw its turnover increase by 6 per cent during the first quarter of this year, to 41m euros. Including the sales of its subsidiaries Moulinex and Krups, turnover reached year-on-year growth of 5.5 per cent. The groups turnover increased worldwide, except in South America, where it fell 14. per cent. Sales in the US went up by 11.1 per cent for SEB alone, and by 5.8 per cent including Moulinex and Krups. In France, the figures were per cent and .8 per cent respectively. In the other countries of the European Union, sales increased by .8 per cent for SEB; consolidated sales went up by .4 per cent.

One of Moulinex's big competitors is General Electric. General Electric states that they are a diversified services, technology and manufacturing company with a commitment to achieving customer success and worldwide leadership in each of its businesses. They operate in more than 100 countries and employ a little over 1,000 people worldwide. General Electric is able to cover a wider range of customers due to their worldwide reputation for quality products. They were able to turn over 15. billion dollars profit in 001, which is extremely larger than Moulinex. Also, General Electric has been placed at the top of the Forbes 500 for several years, whereas it is difficult to even locate financial information for Moulinex.

Another one of Moulinex's American competitors is Maytag. They have been is service for over 100 years and today are a 4. billion dollar home and commercial appliance company. Maytag is among the top three companies in the North American market, offering a full line of washers, dryers, dishwashers, refrigerators and ranges. Maytag is best known for their marketing campaigns. Moulinex lacks the commercial marketing appeal that Maytag has, which has hurt their overall sales.

Moulinex is in a period of consistent failure. The disturbing aspect of Moulinex's decline in the appliance business is the fact that many of the circumstances that Moulinex now faces might have been avoided, and might still be avoided. Much of the problem lies in the fact that Moulinex is subject to French Socialist legislation that generally increases the cost of doing business, and impedes on business policy in the interest of the French citizens. Many of the layoffs that Moulinex was able to carry out, though, had been greeted with picket lines and violence. Though in a Socialist government the workers expect to be more secure, and react more violently to layoffs. In a different environment, the violence and many of the situations could have been avoided.

Previously, Moulinex had been expanding business operations overseas and at home. In 16, Moulinex had projected 40% of its sales would come from outside Europe, and it had far exceeded its projected sales of billion francs in three years (AFP-Extel). In 18, it was reported that Sales had increased by 4. percent (AFP-Extel). However, it was very clear early on that Moulinex was in financial need. Early arrangements had been made with banks to secure favorable loans. As early as July in 001, Moulinex was dispelling rumors that it was going bankrupt. Recently, it had been made known that Moulinex was losing money, but management had remained optimistic, claiming that they had designed a restructuring plan that called for the loss of 4,000 jobs and the resurgence of positive numbers beginning as soon as 00. The response of management was a denial of the inevitable, and the projected job losses were an understatement. However, the workforce's violent responses just four months later might have played a large part in the actual collapse. In October of 001, Moulinex administrators confessed the truths of their circumstances, proclaiming that the sale of assets would not cover their liabilities and that shareholders had nothing to hope for (Le Monde, French Stocks Moulinex).

Moulinex has no doubt dealt with many serious blows to its business. To begin with, Moulinex is a French company. Unfortunately, this implies that Moulinex is subject to strict Socialist legislation that requires that management make a deal with the Unions before any layoffs can be made. The government has recently passed legislation that made it more difficult for companies to layoff employees (Le Figaro, French State). In August of 001, it was thought that only ,00 French jobs would be lost, but continuing talks with Unions meant that in exchange for the loss of these jobs, Moulinex must have maintained two research facilities with 50 and 00 jobs. The cost of maintaining these and continuing research became quite expensive (Le Figaro). On October , Moulinex was forced to sell most of its assets to a rival in the appliance industry, and 8,800 former employees began looking for new jobs.

The labor force resisted any layoffs or partial takeovers that Moulinex proposed. On November 1, 001, workers from Moulinex set fire to an outbuilding and placed generic bombs at several points in the microwave factory where they used to work. They claimed that Moulinex had the decision to either pay them or the building would burn (Mallet). Just a few days later, Moulinex succumbed to the Unions in negotiations. They agreed to compensate ,500 employees with between 0,000 FFr, and 80,000 FFr based on the individual employees' time with the company (Le Monde). More recently, however, SEB has acquired some of Moulinex's operations and has projected an increase in sales at the expense of still more layoffs. Subsidiaries, however, had not been considered in the SEB takeover, and face an uncertain future. Foreign plants, though, have been completely dissolved, as the French company shifts its focus to the domestic market (Le Figaro, Worries Over). Even now, Moulinex is still facing closures and layoffs. There is still time to implement a strategy to avoid the complete closure of the remaining facets of Moulinex. The situation is comprised of three key factors Moulinex must cut costs, the government wants to avoid layoffs, and the workers react violently to layoffs.

The solution, then, is to avoid layoffs without bearing large costs to keeping employees on the payroll. BMW (Bayerische Motor Werk) has had some experience with a similar situation just a decade ago. BMW had recently expanded its markets before 1. German Unification had occurred in 18 and 17 million people entered the German market. BMW had focused much of its resources on satisfying the resurgence of demand. By 1, the German car company, as well as the industry as a whole faced an increase in costs and plummeting demand for automobiles abroad. This in part was perhaps due to the growth of the Japanese car industry and an international recession. In Germany, where one out of six jobs is directly or indirectly dependent on cars, anything that affects the automotive industry has infinite ramifications on things such as morale, GDP, etc. BMW stood alone among Germany's car manufacturers for not having to temporarily shut down plants or reduce the labor force.

The truth is, that the German automobile manufacturing industry survived by using similar means of cost reduction in spite of similar circumstances. Germany, like France, has a socialist government that has strict legislation that prohibits certain behavior of businesses, including layoffs to a large extent. German car manufacturers did not typically lay workers off, rather, they implemented reduced hours at the same pay. Considering that the German Government bears the burden of health care and other services that United States businesses usually provide, the costs of keeping an idle labor force on hand are few. Hourly workers come in reduced shifts to different factories. Many of the factories that were built as expansion operations were temporarily shutdown, reducing costs to the amount of the fixed costs. The German auto industry survived and prospered because it was innovative and found alternative solutions to a problem that many other industries had faced before it.

By reducing man-hours at Moulinex, costs are reduced, and the government and the workforce are more pleased. The government does not find need to intervene in the affairs of Moulinex, as layoffs are few or non-existent. The labor force, too, should remain relatively pleased, and may perhaps sympathize with the company for having compensated and compromised for the sake of the employees.

In the event that Moulinex is still unable to resist impending losses long enough to witness economic recovery, then layoffs are inevitable. If large layoffs are inevitable, at least the workers might recognize that Moulinex had made concessions and did all that they could to keep them on the payroll and protect their interests. Civil disobedience is generally avoided if workers can sympathize with the company and feel that it is better in the long run if the company does commit to a policy of layoffs.

The reaction of many of the German auto manufacturers to BMWs success in the industry was to institute layoff policies. Likewise, if Moulinex's implementation of a layoff-aversion policy fosters growth and success by avoiding short-term costs and liabilities, then one might expect that other small household appliance manufacturers might also have to downsize. In the event that Moulinex should fail, then the competition would definitely purchase Moulinex's closed factories and manage them much more efficiently.

Overall, I feel that Moulinex has the ability to rise above the many problems it has been forced to face. I believe that if it implements techniques such as those followed by BMW, it can once again be a successful company. The new policies and techniques will allow the company to reduce layoffs, but keep employees happy. Based on the research I discovered that Moulinex is a prime example of a centralized foreign subsidiary. The headquarters is located in Paris, France. The headquarters management makes the major decisions. After the decisions are finalized, they are sent to the different branches and executed. Due to the large size of the organization, they tend to apply structural relationships. I knew very little of Moulinex when I first began this project, now I able to compare it to many other large appliance manufacturing companies. I enjoyed researching about this company's highs and lows over the decades.

Works Cited

Hege, Adelheid. Further Restructuring at Moulinex. Institut de Rechercher Economiques et Sociales (translated). /8/00

History of The Moulinex Group. http//www.moulinex.com

Husson, Michel. Industrial Unrest at Moulinex. Institut de Rechercher Economiques et Sociales (translated). 7/1/01

Macaire, Simon. Moulinex chronicle of a death foretold. Institut de Rechercher Economiques et Sociales (translated). /11/01

Moulinex Employees Set Fire to Factory Building. http//www.agrnews.org. 11/1/01

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