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American firms in France: A pre-history
(from the 1890s to the 1930s)
Hubert Bonin, professor in economic modern history at the Institut d’études politiques de Bordeaux (Bordeaux 4-University) (
Version au 1er octobre 2006
Due to a low population growth rate (only some 40 million) and varied income levels (because a large section of the population remained rural and unsalaried) which constrained economic growth, France was far from being an obvious target for American corporations, which mainly sought emerging markets fueled by rising living standards, widespread employment and urbanization; and by 1938, the French share in world industrial production was 4,5 per cent, compared to German or British 10 per cent and to the American 32 per cent[1].Despite the major differences in the lifestyle and standard of living between the United States and France in the first couple of decades of the 20th century, the “American way of life” had already begun to make inroads in the French mindset by the means of advertisements which had just begun to assume their “modern” incarnations – the magazine press, radio, street hoardings, etc. But the major hurdle for the spread of these consumer goods lay in the distribution network itself due to the predominance of the local “boutiques”, the fact that the larger magasins populaires and grands magasins (large stores, the first for middle classes, the second for higer classes) were confined to the bigger towns and that actual cost-price shops came up only in the 1930s. Even otherwise, the industries as well as the markets were also fragmented, with traditional, family-owned brands dominating small regional markets. Nevertheless, the march towards a “consumer culture” continued thanks to French (Monsavon, Manufrance and Moulinex, for example), as well as foreign innovators (Lever-Unilever, etc.) with its pace set by the bulk orders placed by the purchase departments of the larger chain stores.
Our research program on the involvement of American firms in France intends to enlarge the scope of the studies about the “Americanisation of Europe”[2] through transfers of technologies, capital, way of life and practices which have already been published from the 1990s, allowing this “Americanization” of European companies to be well known. The key difficulties lay with the deployment of American firms themselves in Europe; large areas of knowledge staid unpenetrated and we intend to mobilise the pieces of already set up by several colleagues to reconstitute a first outline of the enrootment of American firms within French capitalism and market. The us had become, for almost a century, synonymous with technological innovation. From as early as the end of the 19th century, a number of studies[3] have dealt exhaustively on the fascination generated by the “progressive American civilization”, especially as demonstrated by the large American presence at the Universal Exhibitions of Paris in 1889 and 1900 and the Universal Exhibition held at Chicago in 1893. Along with their German competitors, they were thought to have been the driving force behind the second industrial revolution. And as this last progressed from strength to strength, it reinforced the Americans’ image as world-class innovators. The following decades also saw “Americanism” take root in the global psyche while the transfer of American technology, American ideas and an American mentality grew exponentially.
This article will thus investigate how and why the power of American companies penetrating France was perceived and how such a drive for “multinationalisation”[4] has affected the country, in the wake of pioneering books[5]. We shall try and identify the tactics employed by American corporations to facilitate their incursions and eventual establishment in France by looking at the legal and financial aspects of this penetration: alliances, partnerships, simple license transfers, direct industrial investments, subsidiaries, etc. Thus will allow us to draw a first measurement of direct American influence on the building of modern France through the four first decades of the 20th century.
1. The limits to direct investments
An obvious strategy led American firms to establish direct bridgeheads to conquer rapidly market-shares and especially to control over an efficient transfer of technology through an immediate, that is without any intermediary, supervision of the facilities to be created and developed. This simple strategy was eased by the availability of capital, the superiority in technology and the ownership of patents, and some favourable brand-image – because a few American brands symbolised modernity, progress, and even dream.The French market took part therefore to the beginning of the history of the marketing strategies[6], the ad campaigns and the techniques of sales of some American corporations which gave rise to the establishment of “brand names” and methods of consumer persuasion. Without any exhaustivity, a few cases symbolise this incursion of American companies: In 1923, American Milk Products set up a factory in France[7] for the manufacture of concentrated and boxed milk, while the introduction of Coca Cola in 1933 opened up the “ready to drink” market[8]. Similarly, Gillette had a firm foothold in France with a factory in Paris and an established brand name; and its French director presented Lindbergh[9] with a Gillette razor when he reached Paris in 1927.Household appliances did not escape the American technological influence and penetration: Despite some spirited resistance from local manufacturers[10], Singer began the trend by setting up a factory near Paris, at Bonnières-sur-Seine, and infiltrated the growing sewing machine market. The French sales of Singer accounted for some 5.3 per cent of the Singer group’s total sales in 1912, which meant that it stood fifth in rank after the Russian (24.5 per cent), the us (17.2 per cent), the Germano-Austro-Hungarian group (12 per cent) and Great Britain (5.5 per cent)[11]. The American Radiator Company had several subsidiaries in Europe, including one in France with a factory at Dôle, in the East-Center (with some 700 employees)[12].
The major advantages of the American industries lay in their supremacy in engineering and precision engineering. The French automobile market attracted investments from a circle of us companies which intended to build there a whole productive system, with car producers and automotive equipment firms, for instance the tire manufacturer Goodrich, which had set up a factory in France even before 1914 –, or the ball-bearing manufacturer[13]Timken: a year after Timken uk was taken over by Timken us in 1927, a Timken factory was set up in France (1928).
The best known case is that of Ford[14], the strategy of which had led to direct affiliates in each European countries, with the intent of short-circuiting the constraints of protectionism thanks to plants able to avoid the main customs taxes on imports because they imported from the us only parts and engines, and called for local automotive equipment to complement them. France was involved into this strategy, with a first plant in Bordeaux from 1919, replaced by a larger one in the Paris suburbs in Asnières in 1925 – six years ahead of the factory in Köln – and last by some kind of a temple of Fordism in another suburb in Poissy in 1937. A range of models was offered to French customership: as everywhere the Ford T was succeeded by the Ford A and also by a few Lincolns, but the success came from light trucks reputed by their resiliency and solidity. The key levee was the building of a brand-image around this very reputation of robustness, power, and adaptability, with some accent on the bourgeois clientèle and even on the feminine drivers... With sales of 24,000 sales in 1925, Ford reached thus the third rank among French car-builders, behind Citroën and Renault, and conquered therefore a central place on the market, supplemented by a breakthrough on the colonial markets through a partnership with Cfao, the leading trade-house in French sub-Saharian markets. Ford could be seen as a beacon for the strategy of us firms’ direct investment in France, for the assertion of the American technological competitive edge and its ability to seduce French buyers, lured by a brand-image and a reputation of progress and modernity. In parallel Gm, which was active in France from 1922-1924, itself attempted to compete wih Ford, with an import warehouse in Le Havre harbour (1925) and a light plant assembling there at the end of the 1920s (for light trucks), before it was moved to the Paris suburbs, first in Puteaux around 1930, second in Gennevilliers in 1938(both alongside the Seine river, in touch with Le Havre downstream). But France was not confirmed as a key part of Gm’s European strategy, conversely with the Uk (Vauxhall in 1925) and Germany (Opel in 1929): the Puteaux plant delivered about twelve cars a day in 1938-1939, before being seize by German occupying authorities in 1940 – which was confirmed by Gm manager Sloan himself in his memoirs: “Gm never established an automobile-producing company in France somehow, the time and circumstances have never seemed quite right’’[15], and Anvers welcomed the headquarters of Gm Continental in 1924.
A few other sectors were touched by the technological superiority of us firms in this first stage of the second industrial revolution. In the office automation sector, with typewriters to begin with and later, with multipurpose electromechanical machines which could write, calculate, tabulate, etc., American businesses captured large sections of the French market, and despite the competition from German and British firms, established a solid reputation as early as 1900-1920. Thus, Underwood-Elliott Fischer, Royal, Remington Rand and Ibm entered France[16] and Europe by setting up assembly plants either in partnership with a local party or as a direct investment. In France itself, the Computing Tabulating Company (forerunner of Ibm) added a little assembling facility in 1922 to its marketing subsidiary, Société internationale de machines comptables (starting in 1920) in order to contain the growth of another pushing American company, Powers. After conquering a few private and public – even by the Finance ministry – orders, it took anyway about fifteen years before these bridgeheads turned into a more structured entity resulting in 1935 from the merger of both affiliates into Société française Hollerith, machines comptables et enregistreuses, transformed in 1936 intoCompagnie électro-comptable (Cec, with 650 employees). “It is a major turnround in the development of the company”[17] because it assumed henceforth the production of small and medium-sized equipmentin Vincennes first, and above all, from September 1941, in a new factory at Corbeil-Essonnes (south of Paris); it asserted as a thorough established company, as it sold a large section of Ctr-Hollerith’s range of products with orders from both public and private sectors, and could also export to a few European countries.
The ’’direct strategy’’ offered several cases of successive attempts to get a significant share of the French market; a few trade-marks reached the landscape of commercial networks (Ford, accounting machines, Goodrich, Singer). But they remained an isolated section of American investments in France and touched only a minority of companies. Besides the lagging pace of the equipment of France in modern machines in several sectors (agriculture, medium industry, road transport, etc.), the obvious causes are numerous, among which the strength of French small and medium-sized producers in the regions, which controlled over the largest share of markets thanks to their links of proximity and even trust with the purchasing centrals of distribution firms, with local authorities (and their public orders), with the army (and its captive markets), and even with the ministries (and their networks of relationship to get orders). Priority was often given to true French (owned and managed) companies all the more because businessmen associations campaigned against purchased by foreign firms in the sake of national employment and technology, for instance in car industry or electromechanical.
The case of Westinghouse could be used as a lesson for such a limitation posed to the expansion of us interests in France. The us firm had intended to conquer a large market share in Europe thanks to its competitive technological edge; and a Westinghouse France subsidiary[18] had thus been set up as soon as 1879, through Freins Westinghouse (brakes for railway equipement) and its plant in the Paris suburbs (Sevran). It was followed in 1898 by the Société industrielle d’électricité (Procédés Westinghouse), a common affiliate created in association with an industrial group mixing since 1897 French and British investors, the Compagnie générale de traction, which ceded a plant of itsSociété industrielle des moteurs électriques et à vapeur to the new Sie-w, near Le Havre in Normandy. Thanks to this associaiton, this Sie-w got large orders of equipments for electrical plants, the building of tramways and the electrical equipement of the underground being built in Paris; but its partner was stricken by the harsh competition with Thomson-Houston and the Belgian Empain group on the French markets, which led to the merger of both Westinghouse affiliates, Freins Westinghouse and Sie-w in 1901 into the Société anonyme Westinghouse (saw, with a capitalof frf 20 millions).Saw was no more confined to a mere supplier of the previous partners and became a key corporation which enlarged its scope from France to continental Europe and became the main subsidiary of Westinghouse besides the British one. Saw was controlled in majority by the Westinghouse group (either from the us or from the uk). But these attempts were halted by failure: financial difficulties were at once met, because of lack of equity and means; losses were endured in several years (1905, 1906, 1907) and they had to be covered by a reduction of capital in 1907; but the could not find an relevant help from its American godfather because this one itself faced a financial crisis; the profits were limited because its strategy of expansion on European markets met disappointment, bad credits (in Portugal, Italy, Hungary). Two key explanation to the failure of Saw were the dispersion of its production in its French plants, the low economies of scale, and the meager margin of exploitation, and second the inability to finance on a large scale the orders of energy or transport companies through long-term credits and even direct participations, thanks to the constitution of a network of almost daughter companies, like those set up by competing Thomson-Houston. Despite relevant managerial measures, Saw never became the leverage force which had been dreamed. Globally, the European strategy of Westinghouse met a commercial and financial ceiling: the British branch was sold to Vickers in 1917 and the French one in 1919 to the affiliate of Swiss interests, Compagnie électro-mécanique. – except the brakes business, isolated into a special subsidiary, still belonging to Westinghouse, Compagnie des freins Westinghouse, dedicated to such a niche.
2. American firms hidden under French companies
Because of the limits of the “business model” consisting with direct and open investments, which could lead to fierce or discreet resistance from business and state circles, another business model was more often followed, which chose discreet paths to conquer market-shares: American firms had better hiding themselves under the shelter provided by a local ally. Such an approach was not original at all in Europe, but the French case offers significant case studies to define this strategy.
A. A commonplace strategy: French-American firms
Instead of direct American establishments, partnerships (along the lines of a “joint venture”) were the order of the day, especially in the field of electric engineering[19], which also served to highlight the superiority of American technological know-how due to which French companies had to take recourse to several patents held by their overseas sister-concerns.
a. The significant case of Thomson-Houston (from 1893)
Apart from the few German patents, it was the patents held by Edison and Thomson Houston (and sometimes Westinghouse) which made it possible to erect power plants and electrified transports in the country. In 1900, the first metropolitan transport system[20] began in Paris: It had a Sprague drive train based on General Electric patents and was powered by Thomson Houston patented engines. Companie française pour l’exploitation des procédés Thomson-Houston(or:Thomson-Houston)had been erected as soon as 1893 with the impulsion of Edison-General Electric[21]to transform American technology and patents into a French-looking innovative pole, dedicated to the French markets, its colonies abroad and a very few South-European markets (Portugal, Spain) – because the German beneficiary of the patents kept control on several other markets. Thomson-Houston International Electric got initially a stakeholding in equity to pay the patents[22], but its sister company associated a huge majority of French capital[23], French skills (through the engineers and the managers), French financial influence (owing to the bankers godfathering the group and its daughter companies, gaining revenues from issuing bonds, led by big commercial banks Comptoir national d’escompte de Paris and Société générale). It was in fact a tool in the hands of Ge to transfer technology and patents, but without any appareance of Ge in its trade-mark, its brand image or its response to call for public orders: American roots disappeared through this process of Europeanisation. This explains the success of the diffusion of Thomson-Houston techniques all-over French industry, either through affiliates companies using the patents – and there Thomson-Houston acted as a financial holding company with stakes in the patents-holders –, or through independant ones. Patents were used thus in railways, the Parisian suburbs railways and in Paris underground cars (Sprague-Thomson) at the Belle Époque and in the interwar, supplemented by the supplying of various electric stations. In 1919 a new contract limited to a fifth the stake of Ge but the privileged technological relationship were pursued throughout the interwar, with even French engineers as trainees in the American laboratories; it balanced therefore its own r&d by regular flow of royalties to its us Ge invisible partner.