Version classiqueVersion mobile

Aspects of Corporate Finance: Inter-firm Lending

 | 
Michel Lescure
, 
Michael Moss

Inter-firm credit and multinational companies: the case of Saint‑Gobain in Germany (1945‑1970)

Jean-François Eck

Texte intégral

  • 1Raghuram Rajan and Luigi Zingales, “What do We Know about Capital Structures? Some Evidence from I (...)

1There are at least three reasons for using the case of Saint-Gobain to analyse the contemporary importance of inter-firm credit between non-financial corporations. The first reason is the group’s strong international presence since the middle of the 19th century. Germany, which was just one of the countries where the Group was established, played a fundamental role because of the partnerships forged with other firms and investment in new plant and equipment. All of this activity was managed by the Group’s German subsidiary, Vereinigte Glaswerke (Vegla), based in Aachen. The second reason is the use of trade credit and intercompany loans to finance its activities. Vegla granted trade credit to customers and obtained it from its suppliers. Intercompany loans were arranged between the German subsidiary and the parent company in Paris. The third reason is to be able to ascertain Saint-Gobain’s role in inter-firm credit. It is a French group, but its international development shows a strong focus on Germany. Yet, contemporary econometric studies show that the use of inter-firm credit is greater in Western and Southern Europe, including France, than it is in the more continental part of Europe, including Germany.1 The question is: which pattern does Saint-Gobain follow? Such econometric research is generally based on very recent data, from the last decade or so. Can we use the same analysis for an earlier period?

  • 2We are very grateful to Marie de Laubier, the Group’s General Relations Manager, who authorised ou (...)
  • 3Horst Möller, Saint-Gobain in Deutschland von 1853 bis zur Gegenwart. Geschichte eines europäische (...)

2The Group’s archives in Blois are easy to consult and provide some answers to these questions.2 We examined the archives of the Paris head office on relations with Germany and Vegla’s archives as well. Vegla had four glassworks in Rhineland, including three located near Aachen. It managed Saint-Gobain’s investments in various areas of the glass industry (flat glass, domestic glassware, bottles, fibreglass), which made it both a manufacturing firm and a holding company. It held a dominant position in the German market. Vegla was placed under the authority of a CEO, Jean-Louis Schrader, who ran the firm for nearly a quarter of a century, from 1946 to 1969. It was a flagship enterprise of the Saint-Gobain Group. Previous research, including our own, has already examined the firm, but without focussing on financing issues.3 We would like to take a new look at these issues from the angle of inter-firm credit over a period starting with the monetary reform 1948 and ending in 1969-1970, with the departure of Vegla’s CEO, the merger of Saint-Gobain and Pont-à-Mousson and the end of the German “economic miracle” and post-war boom. We start with a quantitative approach to the phenomenon, followed by an examination of the reasons for the scale of inter-firm credit, along with its consequences for both the Saint-Gobain Group and for its subsidiary.

Contrasting quantitative inter‑firm credit data

3Many bodies at Saint-Gobain are involved in its dealings with Germany. Vegla periodically hosted visits from senior executives at the parent company. “The gentlemen from Paris,” as they were long called, came to Aachen to inspect the plants and discuss the future. The visitors often included the Chairman of Saint-Gobain, Pierre Hély d’Oissel first, then Arnaud de Vogüé after 1952. At the same time, a German Business Committee met two or three times a year in Paris. The Committee, chaired by the General Manager of Glassworks, Eugène Gentil, succeeded by Henry Saint-Mleux in 1952, included several board members and department heads, including the CFO, Paul Francin, and the head of the German and Central European Business Department, Marcel Noisette. After 1959, the German Business was overseen by the International Business Committee chaired by Roger Lacharme and the Directorate General of Glassworks was renamed to become the Directorate General of Glass Industries.

4These bodies produced many reports and abundant correspondence. And yet, financial management was only discussed as part of the background. More stress was laid on other issues, such as the situation of the main competitors, the operations of sales cartels and new manufacturing techniques. Was this because managers were not interested in matters deemed to be of secondary importance? Or is it the result of the Group’s operating mode, with major decisions being made after meetings in Paris and Aachen or during telephone conversations? It is astonishing that there is no clear explanation for this lack of interest. Fortunately, Vegla’s balance sheets and income statements for the whole period under review have been preserved. They provide a quantitative record of Vegla’s inter-firm credit practices.

Little use of trade credit in dealings between Vegla and its German customers and suppliers

5There is a sharp contrast in this respect. Little use seems to be made of trade credit with German customers and suppliers (Figure 1).

Figure 1. Inter-firm credit reported in vegla’s financial statements (as a % of total assets)

Figure 1. Inter-firm credit reported in vegla’s financial statements (as a % of total assets)

Sources: Direction générale des Industries du verre, CSG Hist 00004/106 à 110, Vereinigte Glaswerke, accounting records, 1948-1970 (from 1959 to 1965, data at 30 November each year).

6Over the twenty-three years under review, Vegla’s trade credit receivables in Germany represent 8.1% of its total assets on average, and trade credit payables are an even smaller proportion, equivalent to 3.4% of total assets on average. There is no significant link to the business cycle. If we look at sales revenue, a similar pattern emerges, even though the figures are higher for receivables, (9.0% of sales revenue) and virtually the same for payables (3.8% of sales revenue). The difference between trade credit receivables and payables is equivalent to 4.7% of total assets on average. These ratios suggest that Vegla and its German customers and suppliers make little use of trade credit. This seems to be consistent with other German firms, which avoid using this type of financing for their business activity.

A key role in dealings between Vegla and the parent company

  • 4These are primarily the fees for the plate-glass drawing process used by Rheinische Ziehglas at it (...)
  • 5Same source as the previous figure.

7The financial relations between Vegla and the rest of the Saint-Gobain Group show a different picture. In this case, we look at the funds that the parent company holds in Germany, rather than trade receivables and payables. These funds are recorded in the Vegla balance sheet under the “ordinary account Paris” item, along with other sums arising from relations between the parent company and the subsidiary. These include previous years’ profits that have not been repatriated to France, Vegla’s contribution towards the Paris head office overheads and licensing fees for amounts advanced by the parent company.4 These items make up the “Central Administration” account in the Vegla books at Compagnie de Saint-Gobain, the sole shareholder of Vegla. They are the equivalent of share capital for Vegla. They record large financial flows, which often, it would seem, produce interest, even though we do not know what rates are charged. The relations represent the means that the parent company uses to manage its dealings with its Germany subsidiary. In this case, the credit is not between customers and suppliers, but between companies in the same group. Vegla’s financial statements (Figure 2) show the size of the sums involved and significant changes over the period under review.5

Figure 2. vegla’s Central Administration Account (as a % of total assets)

Figure 2. vegla’s Central Administration Account (as a % of total assets)

8Vegla’s trade credit receivables, net of its trade credit payables, was generally equivalent to less than 5% of its total assets during the period under review, but the Central Administration account of the parent company was equivalent to 70% of Vegla’s total assets on average, which is 14 times greater than trade credit. Up until the end of the 1950s, the “Ordinary account Paris” item was the largest component, made up of funds that the parent company held in Germany. Starting in 1957, retained earnings outstripped the “Ordinary account Paris”, while the other components of the Central Administration Account (head office overheads, licensing fees, net income for the year) were no longer major items. Starting in 1959, retained earnings increased further, so that the following decade seemed more settled. It was as if the steady-state level of financing for Vegla’s business had been reached. In absolute terms, instead of percentages of total assets, we see that the amount on the “Ordinary Account Paris” stayed the same for several years in a row, as was the case from 1954 to 1959 and again from 1966 to 1969. This indicates a deliberate choice by the Group’s managers. Saint-Gobain’s archives provide some explanation for these developments that shed a great deal of light on the way financial relations within the Group operated.

Factors of change

9Four factors explain the changes in inter-firm credit between Vegla and other companies inside and outside the group.

Changes in the regulatory framework

10Up until the Deutschemark became freely convertible for non-residents in 1954 and the French franc followed suit in 1959, currency controls restricted or banned fund transfers between France and Germany. These controls also meant that the amounts accumulating in Vegla’s “Central Administration” account were not available to the parent company. At the same time, Vegla was unable to obtain the funds needed for its growth from the parent company. The glassworks’ general management urged Vegla to use its cash flow to provide the financing needed and, if it was not enough, to borrow from local banks. Management found this to be a good solution, particularly since bank loans were cheaper in Germany than in France in the 1950s.

  • 6  Jean-Pierre Daviet, La Compagnie Saint-Gobain de 1830 à 1939 : une entreprise française à rayonnem (...)
  • 7Fonds Eugène Gentil, SGV Hist 00001/221, Saint-Mleux to Schrader, 20 January 1948.
  • 8Direction générale des Industries du verre, CSG 000417/183, Division internationale, Committee mee (...)

11Hence, inter-firm credit did not follow the expected pattern. In his thesis on Compagnie de Saint-Gobain in the 19th century and the first half of the 20th century, Jean-Pierre Daviet had stated that, between 1919 and 1939, the company “played the role of a banker somewhat, which is a concrete expression of the notion of an industrial group”.6 During the period under review, the Group did not finance the growth of its German subsidiary; instead the Group made Vegla virtually independent, even though it seemed to be very reluctant to do so. The Vegla CEO actually used the situation to give only cursory attention to directives emanating from Paris. It took a severe rebuke in 1948 to end accounting practices that had been acceptable immediately after the war, but were no longer so as things returned to normal. Vegla’s accounts had to report its share of the overheads at the Group’s head office in Paris. This share was a proportion of Vegla’s revenue, in accordance with a pre-war rule set by the German tax authorities. Vegla also undertook to comply with a multi-year timetable running until 1952.7 It was not until the end of the decade, when the external convertibility of the French franc was re-established in 1959, that it was possible to resume transfers of funds between Aachen and Paris. The Group’s management welcomed this development, which made it possible to start gradually bringing profits accumulated in Germany home to France and for Vegla to use some of its cash pile to repay its debts to German banks. This debt hit a low in 1959 and 1960. The parent company’s CFO, Paul Francin, reported on debt reduction to the Group’s directors at an International Division Committee meeting. When asked by Count Elphège Frémy, he answered: “Yes, and we’re bringing our profits home.”8 However, the situation soon changed and Vegla’s debt started to increase again. It peaked in 1966 at DM75 million, rising threefold in five years in constant Deutschemarks. After monetary restrictions were eased, the 1960s showed a uniform pattern with the development of factors favouring stronger financial ties between the parent company and the subsidiary.

A growing number of financing needs funded by inter‑firm credit

12Throughout the 1960s, Vegla pursued a brilliant internal and external growth strategy. Was this at the initiative of Aachen or Paris, the subsidiary or the parent company? The answer is not always easy to determine. What we see is that Vegla was faced with the consequences of its choices, but was unable to finance these choices with its own resources, or with loans from German banks, which were already stretched to the limit, so it had to turn to its parent company for financing, particularly for projects that benefited the Group as a whole.

13In terms of internal growth, the parent company helped finance the modernisation of manufacturing techniques in the Group’s factories. In 1953, the Group introduced a continuous grinding and polishing process in the German glassworks at Stolberg, near Aachen, that treated both sides of glass at the same time. The same process was then adopted in the Group’s French plants. In 1962, the operation was repeated in the opposite direction with the Jusant process, which was the ultimate improvement to traditional mechanical techniques that resulted in fully-automated polishing. It was first used at the Chantereine plant in France in 1959 and then introduced to the German glassworks starting in 1962.

  • 9Fonds Arnaud de Vogüé, CSG 01652/091, memo entitled G-H (Grünzweig und Hartmann) uncredited, 20 Oc (...)
  • 10Direction générale des Industries du verre, CSG Hist 00004/120, Gerresheimer Glashüttenwerke, memo (...)

14External growth was financed the same way. Vegla started acquiring many firms of different sizes to consolidate its presence in areas where it had been absent, such as fibreglass, special glass and insulation materials. An opportunity arose in 1961 to buy from the Bayerische Staatsbank a stake in Germany’s leading manufacturer of insulation material, Grünzweig und Hartman. There were two phases to the transaction. Vegla financed the purchase of a preliminary 27% stake out of its own resources. In the second phase, the purchase of a second stake of the same size was financed by the Paris Head Office two years later. A memo stipulated that “naturally, this is a loan and not a payment of the purchase price. “The memo goes on to prove that executives at Vegla had not changed their habits from the previous period by adding, “We must start by requiring Schrader to make a definitive cash effort by taking funds from the retained profits, even if we have to make a temporary reduction in the investment programme in Germany.”9 Two years later, in 1963, Saint-Gobain decided to buy all of the fibreglass and insulation materials business belonging to a glass company in Düsseldorf, Gerresheimer Glashüttenwerke. The American group, Owen Illinois, had held a controlling interest in the target company since before the war and shared half of its business in this sector with Saint-Gobain. The deal involved large amounts of capital. Consequently, an outside partner was sought to carry the deal through. The Gillet group was approached through its Pricel (Participations industrielles et cellulosiques) subsidiary, which held the Group’s manufacturing interests, including some interests in Saint-Gobain. This partnership would reduce the financing requirement proportionately. However, the combination failed and the fallback was a division of responsibilities between the parent company and the German subsidiary, with no outside involvement. The Paris head office paid 61% of the cost and Vegla paid 39%.10

The subsidiary’s role in managing the Group’s financial interests

15As was the case of other French groups with a strong international presence, Saint-Gobain adopted new management methods during this period. The new methods transformed its internal financial relations and enhanced the Group’s cohesiveness. Tax issues triggered the changes. These issues came to the fore with the creation of a Swiss holding company, Sofri (Société fribourgeoise SA), at the end of 1960. Three years later Sofri became Saint-Gobain International.

  • 11Fonds Eugène Gentil, SGV Hist 00001/221, letter from Direction des Glaceries to the tax authoritie (...)
  • 12  Fonds René Grandgeorge, CSG 01650/226, comité des Affaires d’Allemagne, séance du 19 March 1958.
  • 13Ibid, Schrader to Francin, 3 May 1965. According to the 1965 Saint-Gobain Annual Report, this requ (...)

16This company managed the Group’s equity interests in some countries with fragile financial situations that still restricted outward currency transfers, as was the case for Italy. Despite signing the European Monetary Agreement in 1955, Italy still restricted outward transfers of currency. The holding company benefited from tax advantages, in line with Saint-Gobain management’s constant focus on minimising taxes. In 1954 management asked the French and German tax authorities if Vegla’s share of the Group’s overheads could be deducted from the subsidiary’s taxable income and, the following year, management called in the National Council of French Employers (CNPF)11. Four years later, management asked about the German tax arrangement that provided a tax exemption for Organgesellschaften (“organic companies”), which were subsidiaries that were more than 50% owned by groups that consolidated the subsidiary’s earnings into the group’s taxable income.12 Then they asked the Finance Minister of the Rhineland-Westphalia State for an exception to make Vegla eligible for the Schachtelprivileg (“substantial holding privilege”), which in principle was not available for subsidiaries of foreign parent companies. This was done to recover some of the taxes paid since 1957 and make them deductible from taxable income later.13

  • 14Direction générale des Industries du verre, CSG 000417/185, Division internationale, Committee mee (...)

17Sofri’s third task was to manage the stakes that Vegla had recently acquired in other companies, keeping them within the limits that avoided excessive taxation. In consequence, Vegla’s 27% stake in Grünzweig und Hartmann, which had been transferred to Sofri in 1961, was reduced to 24.5% three years later. This was an unusual business move for Saint-Gobain, but it made Vegla eligible for a German-Swiss agreement on double taxation that reduced German taxes on companies where Swiss shareholders hold less than 25% of the shares.14 Sofri was also used to hold new companies recently founded by the Group. But we are now entering an area where the Group’s management had increasingly ambitious objectives for inter-firm credit.

Major projects

  • 15Direction générale des Industries du verre, CSG Hist 00004/120, Erste Deutsche Floatglass GmbH, pa (...)

18Vegla played an important role in a major financial deal put together by Saint-Gobain in the mid‑1960s. The Group needed to make up for management’s failure to recognize the importance of the float glass process in the 1950s, when it was developed by the British Pilkington group. At the time, Saint-Gobain was investing heavily in improving the traditional mechanical glass grinding and polishing processes and did not believe the new process had a future. It merely bought the licence for France, Germany and Italy in 1963, in partnership with the Belgian company, Glaceries de Saint-Roch, but did not seek to use it immediately. It was held by a research company, Erste Deutsche Floatglass GmbH, in which Vegla held a 60% stake and Glaceries Saint-Roch held the other 40%.15 Then, three years later, rival consortia started building plants based on the new process in Germany, Italy, France and Belgium. Saint-Gobain’s technological superiority was seriously threatened. Management thought the solution was to strengthen ties with Glaceries de Saint-Roch. Long-standing relations between the two had run hot and cold. Management worked on a secret project code named “Operation Saint-Roch”, with major financial arrangements, share swaps and capital transfers. The purpose was to fight off rival consortia that had overtaken Saint-Gobain in the use of the float glass process and to take back the lead in another growth sector, insulation materials and fibreglass. The project called for the leading manufacturers of these products to be gathered in around Saint-Roch and financed by an increase in capital for the Belgian group through subscriptions. Saint-Gobain’s financial holding company subscribed, along with some of its most prosperous subsidiaries, including Vegla. The outcome of the deal was that Saint-Gobain had direct or indirect control of some 30% of the capital of the whole group.

  • 16Direction générale des Industries du verre, CSG 000417/185, Division internationale, Committee mee (...)

19It is noteworthy that Vegla’s stake resulted in a seat for its CEO on the board of the future group. We can also see that Saint-Gobain’s intentions still fluctuated between a willingness to accept international competition and a real concern for controlling its impact. In his remarks on “Operation Saint-Roch” to a meeting of the Finance Committee of Saint-Gobain’s International Division, the Chairman, Arnaud de Vogüé, stated: “The plants we have acquired (Gerresheim, Glaswatte, etc.) give us control of insulation materials in Germany and we have eliminated pointless competition”.16 There remained real ambiguity about the strategy implemented and financed by inter-firm credit. But, more generally speaking, we must look at the outcome of the development procedure used by Saint-Gobain in Germany throughout the period under review.

Beneficial outcomes, despite several failures

Many failures, but relatively minor ones

  • 17Direction générale des Industries du verre, CSG 000417/191, Finance Committee meeting of 19 Septem (...)
  • 18Ibid., meeting of 20 July 1966.

20Some of the failures seem to be serious. Erste Deutsche Floatglas was the research company set up by Saint-Gobain and Glaceries de Saint-Roch for the introduction of the float glass process in Italy, at the Pisa glassworks, and in Belgium, at Auvelais near Liege, which was chosen as the head office of the company. The company’s results were mediocre. The tests conducted were still unsuccessful after three years. The accumulating losses made Saint-Gobain management question the validity of the new flat glass manufacturing technique. Some managers felt that “Pilkington has made fools of us” as Roger Lacharme, General Manager of Glass Industries, put it.17 Despite its abundant resources, Vegla did not have enough cash to revive obsolete glassworks, such as the Franière plant in Belgium. Meanwhile, “Operation Saint-Roch” was still in the planning stage and did not lead to the hoped-for rationalisation of the sector, since the Belgian partner was too reluctant to give up its independence. Then, as was the case for other French companies’ investments in Germany after 1945, Vegla’s development was severely hit by the economic slump in 1966-1967. Upon his return from an inspection visit to Germany, the Chairman, Arnaud de Vogüé, was alarmed by the “downturn” in the economy and listed the symptoms of a crisis in the steel, coal, construction and automobile industry. The latter was the main market for the Group’s plant manufacturing windscreens. The Chairman felt that prudent financial management was critical.18 However, this poor performance was relatively minor compared to the contribution of inter-firm credit made to Compagnie de Saint-Gobain, and to its German subsidiary.

Positive results for Saint‑Gobain

  • 19Ibid., meeting of 26 January 1966, « État des participations étrangères cotées en bourse au 31/12/ (...)
  • 20Direction générale des Industries du verre, CSG 000417/ 192, Finance Committee meeting of 5 June 1 (...)

21The main benefit for the Group was obviously a financial advantage. In Saint-Gobain’s portfolio of French and foreign equity holdings in publicly traded companies, Germany ranked first, followed by Belgium, Italy and Spain. After the mid-1960s, holdings in Germany accounted for between 35% and 53% of the portfolio. The Group owned these holdings either directly or indirectly via Vegla and Saint-Gobain International.19 The cash contribution was just as important. The monthly statements that financial management presented to the board show that funds from Vegla, in the form of repatriation of retained profits and contributions towards the Group’s overheads, played a critical role. When a cash shortfall was forecast, transfers of funds from Aachen to Paris helped to attenuate it. This pattern lasted until the merger with Pont-à-Mousson in 1970. Against the backdrop of increasing cash outflows that weakened the Group’s position vis-à-vis potential buyers, Vegla’s payments, along with those from a small number of French subsidiaries, such as Produits Chimiques et Raffineries de Berre, came to FRF 19.5 million, compared to a cash shortfall of FRF 25.5 million in May 1970.20

  • 21Ibid., memo on the capital increase at Fibras minerales submitted to the Finance Committee meeting (...)
  • 22Ibid., Finance Committee meeting of 11 June 1969.

22This windfall from its German subsidiary and the easing of cross-border financial transfers in the 1960s, as the European Union was taking shape, enabled Saint-Gobain to pursue growth well beyond France and Germany. In 1965, for example, it called on Grünzweig und Hartmann, which had become a subsidiary of Vegla, to subscribe 15% of the shares in a Spanish insulation materials manufacturer, Fibras Minerales. The other shareholders were the Saint-Gobain Group itself (40%), its Spanish subsidiary Esperanza (25%) and the Urquijo Bank in Madrid (20%). The German contribution to the deal may seem minor. Nonetheless, it is significant that it was presented to the Group’s board members as a move with an overall economic rational rather than as the result of any genuine industrial complementarity between the firms.21 This deal, and others of the same type, reinforced Saint-Gobain’s position in Europe. The counterpart was a gradual opening up of the Company’s shares to non-French investors. Management seemed to welcome this development. In 1969, when Chairman de Vogüé announced the acquisition of a 7% stake in the company by Westdeutsche Landesbank Girozentrale in Dusseldorf, he saw it as a consequence of the recent agreement between France and Germany on equal tax treatment of shareholders from both countries.22 It is also possible that the date of the public announcement, only ten days before the extraordinary meeting of shareholders to approve the planned merger with Pont-à-Mousson, was related to the Group management’s search for outside support in order to avoid losing its independence. In any event, it was the first deal in a series that would later grow in size, resulting in internationalisation of the Group’s ownership.

  • 23Such as the work done or managed by Mira Wilkins, Maurice Lévy-Leboyer, Peter Hertner, Geoffrey Jo (...)

23Ultimately, the use of inter-firm credit to finance many deals highlights the Group’s switch to multinational management mode. Building on its strong worldwide presence, both in trade and finance, the Group relied on solutions that it had never used before. The role given to Sofri, which became Saint-Gobain International, seems to be a feature of this change. There are other features, such as the career paths of executives, technology exchanges with other countries, budget forecasting procedures, decision-making procedures and the types of shareholders. Everything testifies to the Group’s transformation as it became a transnational firm, with the relevant management methods, insofar as we can speak of common procedures in an area where each company has its own rules, traditions and specific characteristics. Saint-Gobain is now one of the case studies for economic historians.23 Yet, it is important to stress that this rapid transformation relied on inter-firm credit.

Greater benefits for Vegla than for the parent company

  • 24Martin Höpner and Lothar Krempel, “The Politics of the German Company Network,” Competition and ch (...)
  • 25  Fonds Eugène Gentil, SGV Hist 00001/221, « Note sur nos entretiens avec la Deutsche Bank le 19 Oct (...)

24The contribution from Saint-Gobain to its German subsidiary was also broadly positive. This contribution enabled Vegla to maintain its independence from banks, in contrast to other German glass manufacturers, like Deutsche Libbey-Owens Gesellschaft (Delog), where the Chairman of Deutsche Bank, Hermann-Josef Abs, chaired the Supervisory Board. In fact, observers thought that the interpenetration between banks and manufacturing was an integral part of the “Rhine model of capitalism”24 in Germany during the period under review. Vegla was offered loans to suit its needs by all banks, including local branches of major universal banks, such as Deutsche Bank, regional banks, such as the local Rheinisch-Westfälische Bank, or regional banks from other regions, such as the Bayerische Staatsbank, and even Privatbanken, such as Berliner Handelsgesellschaft, a small bank with a keen knowledge of local power politics. Taking up these loan offers would impose a heavy burden on future earnings. The only way out was closer integration into the Saint-Gobain Group. As a means of financing investment, bank credit and inter-firm credit are more like opposites than complements. An incident from 1956 provides an example of this. Representatives of Deutsche Bank came to Aachen to talk with Vegla’s management about their financial plans. After visiting the glassworks, which were in the midst of being modernised, the bankers learned that Vegla was seeking a large foreign currency loan from them to cover a transfer to Paris for its contribution to the Group’s overheads. The bankers’ surprised reaction was revealing: “The gentlemen were astonished that we brought the matter up when we already owed the bank so much. (…) After a long discussion, however, they stated that they would consider a transfer in instalments (…)”. The author of the memo went on to say: “In the meantime, we hope that the full-scale operation of the new glass production line in Stolberg will improve our finances and put us in a better position with regard to the bank.”25 It was as if, in the German bankers’ minds, their bank could not lend money to finance both the modernisation of the plants and the consolidation of the relations between a German company and the French group that it belonged to.

25Therefore, some difficult choices had to be made. Nevertheless, Vegla was able to use inter-firm credit to establish a genuine group with its subsidiaries. It provided advances to its subsidiaries that accounted for a significant share of their own assets, particularly during hard times (1959, 1968-1970), and it obtained payment terms from its subsidiaries that relieved its own cash position. Therefore, Vegla was reproducing the same pattern in its relations with its own group as that seen in its relations with the Paris head office.

26Vegla’s clout within the Saint-Gobain Group was enhanced, especially in the 1960s. In some years, Vegla’s portfolio of equity interests in German made it the leading foreign subsidiary or branch of the Company, ahead of the subsidiaries in the rest of Europe (Belgium, Spain and the Netherlands) or in the rest of the world (United States). This includes indirect holdings controlled by Saint-Gobain International or interests owned in companies in other countries, such as Cristalleries de Saint-Roch or Fibras Minerales.

  • 26  Direction générale des Industries du verre, CSG Hist 00004/106 à 110, Vereinigte Glaswerke, accoun (...)

27This accumulation of assets was made possible in large part by inter-firm credit. Vegla’s use of inter-firm credit deviated from the German model, in which this solution plays a very minor role, but it did follow the model in its business aspects. The pattern of Vegla’s financial relations with its parent company and its own subsidiaries was more in line with another management model: the French model. Significantly, its equity interests accounted for a larger share of its net fixed assets starting in 1961. By 1970, they were more than double net fixed assets26 (Figure 3). The pattern was the same for several major French manufacturing groups at that time. Could we say that Vegla’s novel situation meant that it fitted both models at the same time?

Figure 3. vegla’s assets (as a % of total assets)

Figure 3. vegla’s assets (as a % of total assets)

Conclusion

28Towards the mid-1960s, the character of relations inside the Saint-Gobain Group changed. New connections appeared between the parent and its German subsidiary Saint-Gobain successfully continued its long-standing internationalisation relying on consistent financial management and giving its subsidiary a free hand for its own management. Of course, it was not a perfect success; there were some failures. The delayed introduction of the float glass process in its German plants resulted in losses. The attempt to create a major European fibreglass and insulation material leader ran into several obstacles. Progress was threatened by economic turmoil. Nonetheless, the result is broadly positive. Financial management played a large part, not to mention other explanatory factors for this success in Germany, such as a stable management team, skilled workers and adapting products to customers’ needs. Saint-Gobain’s financing solutions have played a role in building up the Group and making it into a transnational firm. Despite some remarkable older research, French economic historians still do little work on this subject. We hope that studying the relations between Saint-Gobain and Germany suggests that the notion of inter-firm credit warrants more research from this perspective and could lead to further progress.

Notes

1Raghuram Rajan and Luigi Zingales, “What do We Know about Capital Structures? Some Evidence from International Data”, The Journal of Finance, vol. 50, no 5, December 1995, pp. 1421-1460; Annie Sauvé and Manfred Scheuer, “Corporate Finance in Germany and France: a Comparative Analysis”, Bundesbank Monthly Report, October 1994, pp. 29-45.

2We are very grateful to Marie de Laubier, the Group’s General Relations Manager, who authorised our access to the archives, as well as to the Saint-Gobain Archives team for their willingness to answer our many questions, with special thanks to Anne Alonzo and Amandine Métraux. All of the Archive references indicated here are from this collection.

3Horst Möller, Saint-Gobain in Deutschland von 1853 bis zur Gegenwart. Geschichte eines europäischen Unternehmens, Munich, C.H. Beck Verlag, 2001 ; Jean-François Eck, Les entreprises françaises face à l’Allemagne de 1945 à la fin des années 1960, Paris, Comité pour l’histoire économique et financière de la France, 2003.

4These are primarily the fees for the plate-glass drawing process used by Rheinische Ziehglas at its Porz-Urbach plant near Cologne. Saint-Gobain bought the licence for the process when it took over the company in 1951. Vegla manages this new investment.

5Same source as the previous figure.

6  Jean-Pierre Daviet, La Compagnie Saint-Gobain de 1830 à 1939 : une entreprise française à rayonnement international, Thesis, université de Paris I, 1983.

7Fonds Eugène Gentil, SGV Hist 00001/221, Saint-Mleux to Schrader, 20 January 1948.

8Direction générale des Industries du verre, CSG 000417/183, Division internationale, Committee meeting of 8 March 1961, handwritten notes by the meeting secretary Boyer-Chammard. Elphège Frémy is the heir of a family of directors who were members of the Saint-Gobain board throughout the 19th and 20th centuries. He is also an archivist and paleographer.

9Fonds Arnaud de Vogüé, CSG 01652/091, memo entitled G-H (Grünzweig und Hartmann) uncredited, 20 October 1961 (stress in original text).

10Direction générale des Industries du verre, CSG Hist 00004/120, Gerresheimer Glashüttenwerke, memo entitled “Rachats à Gerresheim” uncredited, 2 July 1963. The recent book by Hervé Joly, Les Gillet de Lyon. Fortunes d’une grande dynastie industrielle 1838-2015, Geneva, Droz, 2015, devotes a chapter to Pricel and its portfolio of equity interests, including its interests in Saint-Gobain.

11Fonds Eugène Gentil, SGV Hist 00001/221, letter from Direction des Glaceries to the tax authorities, 16 March 1954; report on a visit to Aachen by Jean-Pierre Collet, the CNPF representative, to discuss about a French-German agreement on double taxation that the employers’ association would present to the government 20-21 December 1955.

12  Fonds René Grandgeorge, CSG 01650/226, comité des Affaires d’Allemagne, séance du 19 March 1958.

13Ibid, Schrader to Francin, 3 May 1965. According to the 1965 Saint-Gobain Annual Report, this request was granted and five of Vegla’s subsidiaries (Gevetex, Glaswattte, Gossler, Kap-Asbest and Kinon) were deemed to be Organgesellschaften, and “considered as a single unit [with the parent company] for the purposes of sales tax, local taxes and corporate income tax”.

14Direction générale des Industries du verre, CSG 000417/185, Division internationale, Committee meeting of 22 July 1964: sale of 24.54% of Grünzweig und Hartmann to Sofri.

15Direction générale des Industries du verre, CSG Hist 00004/120, Erste Deutsche Floatglass GmbH, partnership contract between Vegla and Glaceries de Saint-Roch, 21 August 1964.

16Direction générale des Industries du verre, CSG 000417/185, Division internationale, Committee meeting of 23 December 1964, notes by meeting secretary Boyer-Chammard.

17Direction générale des Industries du verre, CSG 000417/191, Finance Committee meeting of 19 September 1966.

18Ibid., meeting of 20 July 1966.

19Ibid., meeting of 26 January 1966, « État des participations étrangères cotées en bourse au 31/12/65 ».

20Direction générale des Industries du verre, CSG 000417/ 192, Finance Committee meeting of 5 June 1970, report by Paul Francin on the cash position.

21Ibid., memo on the capital increase at Fibras minerales submitted to the Finance Committee meeting of 26 May 1965. The deal was justified in vague terms by “industrial development in Spain”.

22Ibid., Finance Committee meeting of 11 June 1969.

23Such as the work done or managed by Mira Wilkins, Maurice Lévy-Leboyer, Peter Hertner, Geoffrey Jones, Patrick Fridenson.

24Martin Höpner and Lothar Krempel, “The Politics of the German Company Network,” Competition and change, vol. 8-4, December 2004, pp. 339-356; Michel Hau (dir.), Regards sur le capitalisme rhénan, Strasbourg, Presses universitaires de Strasbourg, 2009.

25  Fonds Eugène Gentil, SGV Hist 00001/221, « Note sur nos entretiens avec la Deutsche Bank le 19 October 1956 » (non signée).

26  Direction générale des Industries du verre, CSG Hist 00004/106 à 110, Vereinigte Glaswerke, accounting documents, 1948-1970 (1956 to 1965, Statistics as Novembre 30 of each years).

Table des illustrations

Titre Figure 1. Inter-firm credit reported in vegla’s financial statements (as a % of total assets)
Légende Sources: Direction générale des Industries du verre, CSG Hist 00004/106 à 110, Vereinigte Glaswerke, accounting records, 1948-1970 (from 1959 to 1965, data at 30 November each year).
URL http://books.openedition.org/igpde/docannexe/image/6011/img-1.jpg
Fichier image/jpeg, 152k
Titre Figure 2. vegla’s Central Administration Account (as a % of total assets)
URL http://books.openedition.org/igpde/docannexe/image/6011/img-2.jpg
Fichier image/jpeg, 160k
Titre Figure 3. vegla’s assets (as a % of total assets)
URL http://books.openedition.org/igpde/docannexe/image/6011/img-3.jpg
Fichier image/jpeg, 138k

Auteur

Jean-François Eck is Emeritus Professor of Contemporary History at the University Lille 3. His research is focused on the french-german economic relationship during the 20th century. Besides his mémoire d’habilitation à diriger des recherches which was published in 2003 by the Comité pour l’histoire économique et financière de la France under the title Les entreprises françaises face à l’Allemagne de 1945 à la fin des années 1960, he wrote Histoire de l’économie française de la crise de 1929 à l’euro (Armand Colin, coll. U, 2009), edited several books about economic and social history in north-western Europe and contributed to scientifical meetings on exchanges of men, technologies and capital in the part of continental Europe which is located between the Seine and the Rhine.

© Institut de la gestion publique et du développement économique, 2019

Conditions d’utilisation : http://www.openedition.org/6540

Acheter

Rechercher dans OpenEdition Search

Vous allez être redirigé vers OpenEdition Search