Compagnie de Saint-Gobain

Dec. 21, 2004
After 334 years, the company founded by King Louis XIV restructures for the future.

In an era when start-ups, failures, and mergers are proliferating at a dizzying pace, it's a badge of honor for a company to have been operating for 34 years. But how many can claim to have existed for three hundred and thirty-four years? Or that they were founded by a legendary king? Or that they were the creator of one of the world's architectural wonders? Compagnie de Saint-Gobain, a France-based materials mega-company, can make all these assertions. One of the world's oldest companies, it was founded in 1665 by order of Louis XIV, the famed Sun King, who wanted a domestic French company to manufacture mirrors for his palaces. The firm built the incomparable Hall of Mirrors at Versailles. Despite this colorful past, Saint-Gobain keeps its eye determinedly on the present -- and the future. Through careful attention to business strategy, it not only has been able to survive in a hotly competitive industry, but prosper. With nine product lines, the company posted 1998 earnings per share of US$14.59 on revenues of $20.9 billion. And it is an exemplar of a global company. As long ago as 1830 -- long before the term "globalism" was coined -- it set up a sales office in New York. Today it operates in 42 countries, and has more than 120,000 employees. Almost three-fourths of its sales and two-thirds of its workforce are outside France. To be sure, all has not been smooth through the centuries. When the company was a mere 125 years old, it nearly was a casualty of the French Revolution. There has been more recent turbulence -- in 1982 when it was nationalized by the then-Socialist French government, in 1986 when it was reprivatized, and in the early '90s when it suffered from the worldwide recession. The 1986 reprivatization set in motion a whirlwind, 10-year corporate restructuring that saw the company dispose of cyclical businesses that made up more than half its sales, notably paper/wood, mechanical engineering, and contracting. Meanwhile, aided by a host of acquisitions, Saint-Gobain aggressively entered new businesses. The purchase of UK-based Norton Co. and Canada's Carborundum Co., for example, put it into abrasives and industrial ceramics; the acquisition of Poliet SA, a French firm, allowed it to enter specialty distribution. The company also beefed up certain existing activities -- principally glass containers through its of a U.S. joint venture with Ball Corp., resulting in Ball-Foster Glass Container Co. The restructuring left Saint-Gobain with nine businesses, and it is a leader in each. The company ranks as the world's No. 1 producer of flat glass, insulation, ductile iron pipes, major industrial ceramics, and abrasives. It is No. 2 in containers (its largest unit), reinforcements, and building materials for roofing and cladding products, and No. 3 in flat glass. One of its specialty-distribution units is No. 1 in Europe. Perhaps more important to the company's success than its scores of acquisitions, however, is its embrace of technology, believes George S. Haour, professor at IMD (International Institute for Management Development), Lausanne, Switzerland. "Saint-Gobain relies strongly on technology and R&D to reduce manufacturing costs and to introduce new products," he says. "In mature industries such as those the company is in, you can do only well if you innovate. And Saint-Gobain has a track record of being a pioneer." Another close observer of Saint-Gobain, a Paris-based officer of a major U.S.-based management-consulting firm, marvels at the company's comeback since 1986. "Saint-Gobain went through a difficult period when it was state-owned," he says. "But now it is a successful case of a classical, old-fashioned French company becoming focused, finding its strategy, and becoming international." Heading into its 335th year, Saint-Gobain is looking to the future. The restructuring is over, the company declared in last year's annual report. Its new phase, the firm says, "will be built around growth operations close to existing activities," with expansion to "a selective number of emerging countries with proven growth potential." Louis XIV, who wanted only mirrors for his palaces, would be dazzled.

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