A marriage will not take place

FRANCE MARC ULLMANN

Paris—Is the Common Market ever to be any- thing more than a club whose members under- take not to erect customs barriers between each other? This is the essential question provoked by the French government's decision to forbid the purchase by Fiat of 'a major equity interest' in Citroen.

It would be reassuring to conclude that General de Gaulle is the only obstacle to pro- gress, and that once he is out of the way the construction of Europe will once again become an irresistible process. Unfortunately things are not that simple, as recent events have shown.

The story starts, not with the Citroen affair, but with the veto imposed by the German Economics Minister, Herr Karl Schiller, on an offer by the Compagnie Francaise des Paroles to take control of the German oil company, ARAL. Herr Schiller's excuse—one that did not apply to the French government's intervention in the Citroen-Fiat negotiation—was that ARAL is the last remaining German 'national' com- pany in a major sector of the economy: all the other oil companies operating in Germany are now American (or British or Anglo-Dutch) con- trolled. All the same, the incident involved the treatment of a French firm as alien in Germany notwithstanding the Common Market. The nation state had the edge over Europe.

The second piece of evidence is the wide- spread resistance in France to any idea of a deal between Fiat and Citroen. The govern- ment was not acting in isolation: on the con- trary, it would have required a great deal of courage for it to have dismissed the many repre- sentations made to it against the merger. Europe, it seems, is very far from being a gentle 1t really is a great sight! From up here I can see the Grand Canyon, the Great Wall .of China, student demonstrations . . : slope on which everyone is set to move. It is a revolution yet to be made; and it is easier to op- pose the changes it requires than to impose them.

Even before M Bercot, the chairman of Citroen, went to see the Prime Minister on 25 September, the other French motor manufac- turers (Renault and Peugeot--Simca is already a subsidiary of Chrysler) had laid siege to the

government. M Pierre Dreyfus, the managing director of Renault and a particular bete noire of M Bercot was especially active. A Fiat- Citroen agreement, he warned, would lead in-

eluctably to the complete absorption by Fiat of Citroen, badly run and in financial trouble.

`European agreements are all very well,' M Dreyfus opined, `but the French participant must not be by far the weaker of the two.' In- stead, Dreyfus suggested; Renault (state-owned) and Peugeot (a publicly-quoted company) should get together to rescue Citroen: 'Some government loan would be needed for the time being.' The Peugeot family quite agreed.

M Couve de Murville was far from enthusi- astic. The government had already lent Frs 200

million to Citroen in 1966 and 1967, and this, he felt, was more than enough. His inclination was to let Citroen and Fiat go ahead: at least they were not asking for money.

So then the trade unions waded in. Like M Dreyfus, they reckoned that Signor Agnelli

would become the true boss of Citroen; and this would inevitably mean that `if some factories had to be closed somewhere, it would be the

French ones that would go.' The accessory manufacturers and sub-contractors got in on the act, arguing that Citroen's French suppliers

would be threatened, and Fiat's Italian suppliers would have a fine time carving up their market. Thus the affair grew to assume proportions of national significance. It was twice brought up in Cabinet; de Gaulle had a tere-a-rete with Couve de Murville, and then a long session on 5 October with the Prime Minister, the Finance Minister, and the Minister for Industry.

Meanwhile M Bercot began to lose his nerve. On 25 September he had simply 'informed' M Couve de Murville of the conclusion of an

agreement 'designed to strengthen the competi- tive position of the European motor-car indus- try.' By 4 October, in an interview with the weekly Express, he attacked those who sugges- ted `quite mistakenly' that the agreement had anything to do with `any shortage of liquidity' at Citroen. Two days later he saw the Prime Minister again. He went over to the attack. The agreement was on a 'take it or leave it' basis:

as for Renault, he would have nothing to do with them—'unless, of course, the government were prepared to denationalise the company and

sell it to Citroen.' M Couve de Murville had sufficient appreciation for the irony of the

situation not to shrug his shoulders. Nothirg further happened, and on the following day M Bercot decided to burn his boats with a declaration that `there could be no question of an alternative arrangement.' It was now up to the government. On the Tuesday-8 October—Citroen's largest shareholder, M Francois Michelin, of the

Michelin tyre family, tried the .soft approach He assured the Prime Minister that he had no wish for a row with the government, and that

he had no intention of evading its controls by using a Swiss holding company to transfer shares to Fiat. He suggested that his family's controlling interest in Citroen should be raised from 56 per cent to 70 or 80 per cent, by way of a rights issue. This holding would then be sur- rendered to a holding company, domiciled in France, in which Michelin would have a 51 per cent stake, and Fiat the rest. The board of the holding company would run the manufacturing subsidiary. This arrangement, he suggested, would offer three major attractions. First, the control of the company would effectively re- main in French hands. Second, Citroen would get some fresh capital it badly needed. And third, its liaison with Fiat would help the French firm to boost its stagnating exports.

The doubters were unconvinced. For the Michelin formula would still mean that Fiat would have a powerful voice in the running of Citroen, while the reverse would not apply. The chiefs of Renault, Peugeot and the unions re- doubled their warnings. The government was particularly sensitive to any suggestion of in- dustrial trouble. The recovery of the economy

after the May crisis is going better than ex-

pected: and no one wishes to put it at risk. So once more European considerations had to take

second place, and on Thursday afternoon General de Gaulle and M Couve de Murville decided to answer M Michelin with a 'no, but. . .

A communiqué from the Prime Minister's office said there could be no transfer of shares, but that there was no objection to a cooperative

agreement (covering such things as research, in- vestments, etc) between the two companies— always providing that any agreement `did not upset conditions of employment or the balance of the French motor-car market.' In other words; the French government would give its blessing to the marriage only on condition that it was not consummated.

Now it is up to Signor Agnelli. Should he break off the engagement? Or should he settle for an arrangement that promises nothing but offers possibilities of future evolution? From his point of view the prize is undoubtedly Citroen's R and D department—far and away the largest in Europe. With a payroll of 2,000, it has a tradition of turning out cars years in advance of the competition, and it has some spectacular innovations on the drawing-board at the present time. But the knowledge that he can at best only

obtain a small equity stake in Citroen makes the whole proposition far less attractive. For he attributes Citroen's present difficulties to its old- fashioned marketing and publicity techniques, and believes that the solution is precisely to bring them up to date.

So the French government, in opting for what it reckons to be the cautious policy, has, in fact, taken two considerable risks. One is that the limited agreement goes through, and Fiat gets what technical advantages out of it that it can; but the French government is left with the re- sponsibility of bailing out a firm which, in any case, urgently needs bringing up to date. The other is that Fiat drops Citroen and takes up with Volkswagen, the only European manufac- turer which exceeds it in size. If so, the French manufacturers would have to come together to survive—with the French government once again providing the cash. And once more France would be seen to be standing aside from the European adventure.

Whatever happens it is this adventure which has been the major casualty of these events. An anal}sis of t'-- whole sad story demonstrates

with blinding clarity how there is no real Euro- pean authority, in Brussels or anywhere else: and how, in the absence of such an authority, the common European interest is always sacri- ficed to national priorities.