Managing Automation - February 2009 - (Page 17) joshua greenbaum NOTES By the time you read this, the knife-edge existence of the Big Three automakers will have been decided, one way or another, by a reluctant Congress. Bailout or bankruptcy seem at this writing to be the only options, and American automotive manufacturing will be forever changed by whatever direction Congress chooses. Regardless of the outcome, a look at what France did with its perpetually ailing national computer manufacturer, Groupe Bull, might be instructive, if unfortunately so. Bailing out fundamentally bad business models has lots of risk. In the case of Groupe Bull, rarely has so much good money been thrown at a losing business model with such mixed results. Nationalized in 1982 and privatized again 12 years later, Bull remained in business those 12 years despite ineffective product development and marketing. And during its period of nationalization, Bull’s ability to compete in the global market was severely hampered by a strict allegiance to French labor law, which made it impossible to implement the kind of cuts that are fairly standard in American high-tech companies when the red ink starts to flow. What was most dramatically wrong with this picture was that Bull was never competitive on the product side. Its servers and workstations had a me-too quality, and its product development and marketing were simply not up to fighting off American companies such as Sun, Digital Equipment, and IBM. The billions of francs pumped into Bull never really enhanced the company’s ability to compete. What was most dramatically right with the perpetual Bull bailout was the preservation of jobs and computer expertise inside a country that, like all major industrial powers, needs that expertise. Bull alumni could be found throughout the French high- Bailout: Lemon of an Idea? josh@eaconsult.com As ailing industries turn to the U.S. government looking for a bailout, it may be instructive to look at France’s experience with Groupe Bull. tech economy, and while the company was clearly struggling strategically, by 1996, privatization seemed to be working: Bull’s revenue jumped to $4.5 billion, and the company turned a profit. The good times proved to be short-lived; by 1998, revenue fell, and cutbacks and sell-offs ensued. But Bull survived. Today, the company is fully privatized and remains profitable with annual revenue of less than $2 billion. It has moved with the times into a greater mix of software and services, and currently derives more than half of its revenue from outside France. Did the French government and taxpayers get their money’s worth throughout the period of nationalization? The total amount of money spent propping up Bull is probably unknowable, but it is clearly the equivalent of billions of dollars. If we judge the Bull bailout by the company’s current status, it might look like a good decision — as long as you don’t consider what else the French government could have done with the money. The failure to make Bull more competitive with all that money is the problem that sticks in my craw every time I think about bailing out Detroit. Bull made uncompetitive products before it was nationalized, and it continued to make them after the government pumped billions of francs into the company. Bad product development processes and non-competitiveness were too deeply ingrained in Bull’s culture to be shaken loose by the infusion of capital. I fear the same is true for Detroit, and any bailout will yield similar results. The best I can say is that I hope I’m wrong, for all our sakes. ■ Joshua Greenbaum is principal of Enterprise Applications Consulting, based in Berkeley, CA. maonline managingautomation.com For more of Joshua Greenbaum’s views, visit: ❑ Walking on Eggshells www.managingautomation .com/notes58 ❑ Depression 2.0 www.managingautomation .com/notes57 ❑ No More Party Favors www.managingautomation .com/notes56 17 February 2009 ma Photo: David Toerge http://www.managingautomation.com http://www.managingautomation.com/notes58 http://www.managingautomation.com/notes57 http://www.managingautomation.com/notes56
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