BOUYGUES, 1952-1989:
FROM THE BUILDING INDUSTRY TO THE SERVICE SECTOR
by
Dominique BARJOT
(University Paris-Sorbonne – Paris IV)
In 2001, Bouygues was the sixteenth French industrial group, with a turnover of 20.5 billion euro, a cash flow of 1.1 billion and a workforce of 125,000[1]. Above all, the 2002 statistics computed by the Direction of International Economic Affairs (DAEI[2]) of the French Department of Environment, Transport, Housing, Tourism and Maritime Affairs established it as the European leader in the building industry:
Table 1 – The top five European building industry groups, as of 31 December, 2002
(turnover in billion euros)
1 / Bouygues (France) / 22,2[3]2 / Vinci (France) / 17,6
3 / Skanska (Sweden) / 15,9
4 / Hochtief (Germany) / 12,8[4]
5 / AMEC (United Kingdom)
And Eiffage (France) / 6,9[5]
6,9
Source : DAEI[6]
Even when excluding al its activities in television and telecoms, Bouygues remained the European leader with a turnover of 18.3 billion euros. However, Bouygues was characterized by a higher degree of diversification of its activities. It was particularly striking when copared with his two major French competitors, Vinci[7] and Eiffage :
Table 2 – Turnover of the three biggest French building groups by sector of activities, as of 31 December 2003 (% of total)
Bouygues / Vinci / EiffageConstruction / 19,4 / 43,0 / 44,0
Road works / 33,6 / 29,0 / 29,5
Energy / 2,3 / 17,2 / 19,0
Metallic Structures / 0 / 0 / 3,0
Real Estate Activities / 5,6 / 0 / 4,5
Public Utilities / 11,2 / 10,5 / 0
Television and Telecom / 27,4 / 0 / 0
Holding / 0,5 / 0,7
Source : Annual reports of each group.
As can be seen, Bouygues was making 55.3% of its turnover in the building industry and public works stricto sensu against 88.8% for Vinci and 95.5% for Eiffage. The generally held view is that such a high level of diversification is a very recent phenomenon, the result of the founder’s son action, Martin Bouygues, after the death of his father Francis, and the founding of Bouygues Telecom. The reality is more complex. Francis Bouygues himself largely began the move to diversification. While originally a “big builder” (1), he was the first to have the idea of a multi-services group (2).
1/ FRANCIS BOUYGUES, A “BIG BUILDER”
Francis Bouygues offers a very good example of the generation of captains of industry that rose to prominence during the “Trente glorieuses”[8] period[9]. But his is a rather original case[10]. In spite of the size reached by his group from 1986, Francis Bouygues’s, then his family’s, hold on it remained intact. Moreover, its success was directly linked to the personality of its founder. In 1977-78, a cancer kept F. Bouygues out of business during a complete year. After recovery, F. Bouygues resumed the leadership of his group and led it to further success. Between 1952, when the firm was established, and 1974, he asserted himself as the main outsider in the building and public works sector. Then, from 1975 to 1989, he established himself as “primus inter pares”.
1.1/ The outsider (1952-1974)
Between 1952 and 1974, the Bouygues firm grew very rapidly[11] :
Table 3 – Yearly average growth rate of turnover in real terms (%, before tax)
1952-1960 / + 70,21960-1974 / + 20,8
Source : Bouygues Archives.
Especially spectacular during the 1950s, this growth continued after at a sustained pace.
A/ The fifties, or the success story of a small- to medium-sized firm
The first contract obtained by Francis Bouygues was modest : it was the renovation of an old paper mill. But the firm had selected a very profitable niche : the building of industrial sites in the context of France’s post-war reconstruction. At the end of 1952, the firm employed 10 full-time workers, against 2 at the beginning of the year. In 1953, it obtained its first big contract : the construction of IBM offices. In the same period, the firm built many houses for private clients. Under this vigorous expansion F. Bouygues decided in 1954 to turn his firm into a limited company. Such a growth made necessary to find fresh capital. In 1959, the in a context of serious recession, F. Bouygues, in order to find extra funding for his firm, at the time employing c. 1,000 persons, found a new partner in the person of René Augereau, a well off Polytechnician.
B/ The sixties : a leader of social and private housing
From then on denominated Entreprise Francis Bouygues (or EFB), the firm -, the firm pursued its fast growth throughout the sixties:
Table 4 – Average turnover (before tax) growth rate and various profit indicators, 1965-74 ( % and constant francs)
Turnover before tax / + 21,2Gross profit on sales / + 26,9
Gross cash flow / + 23,3
Gross self-financing / + 20,7
Source : Bouygues Archives.
The firm continued to work for private clients, in particular to built offices and head offices (e.g. Peugeot). It took a major part in the development schemes of the Maine-Montparnasse and Bercy areas. It built a large number of concert halls, industrial buildings, as well as large scale public facilities, such as the extensive Créteil hospital. From 1965 on, and thanks to the perfecting of a prefabricated building process aptly named the “Bouygues process”, the firm became successful in the building of primary schools, becoming one of the main contractors to the French Department of Education. Yet it did not stop working for the private sector, especially in a context of a construction boom in Paris and in the nearby suburbs. “Le Méridien” hotel in Paris stands out as one of the most remarkable achievement of the period in Paris.
The big novelty of this period was the taking off of social housing. EFB first got involved in this field in 1959, when it obtained a contract to build 3,000 HLM flats[12] at Orly and Choisy-le-Roi. In 1965, it had built 10,000 flats in the whole of the Paris area. It then soared between 1966 and 1969. Charles Defontaines, head of the commercial office, powerfully promoted a strategy well suited to this market. In 1966, the Department of Construction wanted to build more social houses at reduced costs; in order to do so, it asked developers to come up with low-cost, standardised models (hence the name of “policy of models” it is given in France) presented by a team bringing together an architect and a contractor. The team formed by EFB and the architects Andrault and Parat won the bid. Thanks to this success, Bouygues strengthened its positions in the social housing sector : in 1969, it furnished 44% of the company’s turnover. At this date, the most part of its works was localized in Paris and its area, but it was taking an increased interest in the other French regions.
The nomination of Albin Chalandon at the head of the Department of Public Works and Housing in July 1968 opened up a new period. If the global demand in housing was still growing, the private (non-recipient of public aids) market amounted to a larger share of it. EFB became S.A. Bouygues, a public limited company, in 1972, and it refocused its activities toward the building of private houses. During the years 1969-74, it took a leading part in the large scale Parisian redevelopment schemes. It was equally interested in the soaring market in detached housing and in architectural innovation. A particular purpose was to offer alternative provisions to the then predominant high rises estates, either bars or towers. Indeed, architectural innovation was becoming an major element in the strategy pursued by Francis Bouygues. Its firm took part in the first attempt to substitute curved lines to straight lines. It was the case, for example, at Créteil, where Bouygues built “cabbage-” and “corn”-shaped houses, invented by Gérard Grandval.
Francis Bouygues promoted solutions that were both original and often cheaper than those of his competitors, which allowed his company to grow as fast after 1968 than between 1960 and 1968. It had however to realize important investments. Consequently Francis Bouygues floated his company on the Parisian stock exchange in June 1970. After this operation, he owned 26% of the company’s capital, but with his senior partner, R. Augereau, and a friend, Georges Musso, he controlled 45%. Moreover, the presence of the Crédit Lyonnais bank meant that stable shareholders controlled almost three quarters of registered capital. The floatation offered an influx of fresh cash, thanks to which the firm developed rapidly its activities in functional works and civil engineering: from hardly a third of the company’s turnover in 1969, it amounted to over a half in 1974. The firm was still building houses, but also realizing a lot of major works in the new Parisian business districts, such as the Fiat Tower at Paris-La Défense. It played also a major part in the building of large suburban shopping centres and took advantage of the policy of industrial decentralization : it delivered keys in hand the two Ford factories in Bordeaux.
C/ Diversification to public works
The firm entered the public works market from 1968 on : its proportion of the company’s turnover grew from 9% in 1960 to more than 28% en 1974. The starting point of it was when EFB got the contract for the new Parc des Princes Stadium in Paris. F. Bouygues was willing to win this contract at any price as it offered him a chance to get prestige and to compete on equal terms with the big French public works firms of the period (Société Générale d’Entreprises, Grands Travaux de Marseille, Campenon Bernard, CITRA[13], Dragages Travaux Publics). He concluded an agreement with an other French firm, Entreprises Boussiron, which was very competitive in the technology of prestressed concrete. EFB’s offer was 10% cheaper than that of other competitors : the firm won the bid. In spite of the difficulties, the contract was a success, since the works were completed three months in advance of the deadline. In 1972, S.A. Bouygues obtained another very big contract : the first phase of the building of a nuclear plant at Le Bugey (Ain), a work still more difficult than that of the Parc des Princes. A string of problems led to three changes in works director. But the firm got over all these difficulties. Not only SA Bouygues ended the work in financial equilibrium, but also it obtained the other phases of the project.
The company’s first big work abroad started in 1972 in the shape of the Teheran Olympic stadium. This contract had been won over the most powerful American civil engineering firms : Morrison Knudsen and Bechtel Corporation, at this period the civil engineering World champion. In partnership with three Iranian firms, Bouygues met many obstacles : the quantity of steel necessary to the prestressing treatment of concrete was underestimated, the manpower, although numerous, (c. 5,000 workers), was unskilled, the budget faced permanent, structural, deficit. This contract yielded no profit, but it made Bouygues a household name. It gave the firm the scope to achieve its very ambitious investment projects. Indeed, from this date on, Bouygues had become the nucleus of one of the most powerful French public works groups.
At the end of 1973, SA Bouygues controlled a number of subsidiaries. The oldest was Etudes et Préfabrication Industrielles (EPI). Founded in 1959, it prefabricated in factory all the parts demanded by building works. In the beginning, it worked above all for EFB. Yet, the decline of heavy, factory-made, prefabrication, rendered it necessary (from 1963 on) to redirect its production towards the making of forefront elements, using the Arbeton process that had been invented by the firm itself. In spite of a contraction in its global activity, EPI had gradually reduced its dependency towards the Bouygues group : in 1972, the group was responsible for only 37% of EPI orders.
Quille, a subsidiary established at Rouen, was more dynamic. Founded in 1923, it entered the Bouygues group in 1965. It innovated much in the sector of constructive works : from 1973, it delivered the first French bridge with prestressed girder in light concrete. Between 1972 and 1975, it played an essential role in the construction of the Antifer oil terminal. Its most remarkable work was probably, in 1973 and 1974, the laying of a 100 km long gas pipeline, intended for Franco-Swiss supply, at the bottom of Leman Lake. Boosted by this first venture in the area, F. Bouygues took in 1970 the control of GEC, Groupement Français de Construction, a firm located in Lyon. In 1972, the Bouygues group was getting a foothold in the Marseille area, thanks to Mistral Travaux, a company made from scratch, in Aix-en-Provence. This confirmed a very profitable strategy. Indeed, it contributed to turn Bouygues into one of the most profitable European groups.
1.2/ 1975-1989. “Primus inter pares”
This result was accountable to Bouygues’s personal business connexions and to the quality of his staff, but also to an exemplary style of management, a mobilizing social model and a sustained effort in investment and in R&D[14]. Because of these elements, the group’s growth remained strong even after 1974 :
Table 5 – Annual average turnover (before tax) growth (%, in constant francs)
1974-1979 / + 7,41979-1984 / + 11,6
1984-1989 / + 4,7
1974-1989 / + 8,9
Source : Bouygues group Archives.
Moreover, the gross cash flow was growing almost as fast as the turnover. This spectacular growth was superior to that of the majority of Bouygues’s European competitors.
A/ International expansion
In France, the Bouygues group faced during the second half of the 1970s a strong relative decline in its public works and civil engineering activities, in spite of important works such as the Forum des Halles, in Paris (1977-9), but the part of housing, and above all social housing, increased a lot. This evolution was largely the result of the group’s rapid expansion in provincial France. Twelve new subsidiaries were added to the three original ones (GFC, Mistral Travaux, Quille), either by takeover, by pure and simple purchase, by scission of existing companies, or by creation. These companies developed their activities in the field of restoration, rehabilitation and maintenance.