Vivendi faces uncertain future
The events of this week sounded eerily familiar. The ailing fortunes of yet another multinational powerhouse sent its stock price plummeting. Newspapers filled their pages with tales of executive greed and corporate ambitions that stretched too far, too fast. But this time the culprit was not America's Enron Corp. or WorldCom Inc. or Xerox Corp. but Vivendi Universal -- a transnational group that included the United States but nonetheless was founded in France and headed by a French president. Just a year ago, Vivendi was considered a success story, after its president, Jean-Marie Messier, expanded a nondescript, ailing French water and sewage company named Compagnie Generale des Eaux, or General Water Co., into a high-flying international media and telecommunications conglomerate. And Messier -- whose buying spree included acquiring Canada's Seagram's Co. and America's Universal groups -- basked as France's golden boy, able to successfully compete on both sides of the Atlantic. Today Messier, discredited and facing possible judicial action, announced his resignation Tuesday, a report quickly followed by rumors of attempted books juggling. The company he ran is saddled with a multi-billion-dollar debt and southbound stock values, despite a small rally at week's end. Suddenly, Vivendi's transatlantic success story has been transformed into a transatlantic tale of caution. Many industry analysts describe it as a property-rich, cash-poor company that ultimately can't pay its bills in a struggling economic environment. "The affairs of Enron, WorldCom or Xerox proves that markets aren't restricted by clear rules, or that these rules can be transgressed without safeguards to rapidly detect them," France's Le Monde newspaper wrote in an editorial this week. "France and Europe are touched as well, as Vivendi Universal shows." As in the United States, the French press and politicians are now calling for new standards of accountability, although business scandals are hardly a novelty in France. Investigations into France's Credit Lyonnais banking firm and the former Elf oil company are still going on for alleged wrongdoing that took place years before. This time, however, the ramifications are global. "A company like Vivendi is a good example to show that we can no longer talk just about the United States, France or Europe," added Ali Fatemi, head of the business department at the American University of Paris. "We're talking now about a globalized economy. Vivendi is as much an American company, after the purchase of Universal Studios, as it is French." On Wednesday, Vivendi's French and North American board of directors selected 63-year-old French businessman, Jean-Rene Fourtou, to replace Messier. A veteran executive, known for restructuring ailing firms, Fourtou promises to deliver a financial plan by September. "I can't deny that the funding situation is tense," Fourtou said during an interview with Europe 1 radio. "But I don't think there were instruments that could have predicted our short-term liquidity crisis. I am very confident that the board and I will find a solution." Vivendi has selected two other executives to help tackle the company's problems. And Fourtou named a powerful, well-connected French businessman, Claude Bebear, to the board. Two major French banks -- possible candidates to bankroll part of Vivendi's short-term debt -- have expressed their confidence in the new turnaround team. But major concerns remain. France's Force Ouvriere (Worker's Force) union has threatened judicial action, arguing Messier misled Vivendi's staff with assurances the company was in good financial shape. The union is also outraged by reports Messier is negotiating a multi-million dollar severance package -- contrary to his earlier vows to reject American-style golden handshakes. "The personnel had confidence in Mr. Messier," said Force Ouvriere spokesman, Marc Blondel, during a radio interview this week. "Mr. Messier gave them certain guarantees that weren't respected." The union is far from the only critic blaming Vivendi's former boss for the company's downfall. "Exit J6M!" wrote France's satirical Le Canard Enchaine, referring to Messier's nickname, which stands for 'me myself, master of the world.' "Jean Marie Messier is no longer the master of the world!" "Vivendi's problem is not particularly French," said Guillaume Parmentier, the head of the Paris-based French Center on the United States. "Many people overvalued the telecom and communications sector. They thought the market would continue to go up, and they were wrong. But it's much easier to blame Messier." A number of analysts believe that Vivendi's board will ultimately shed some of its assets to pay its debts -- a possibility that already ignites concern. French supporters fear the country's money-losing, pay-TV channel, Canal +, will be the first to go. Others worry France's "cultural exception" will be eroded, if Vivendi shaves off its French publishing, film and music interests. That includes France's new culture minister, Jean-Jacques Aillagon, who reportedly informed Vivendi's Fourtou he was "preoccupied" by the possible loss of France's "industrial patrimony." American University's Fatemi has other concerns. "We are in a very sensitive stage in the world economy," Fatemi said. "If we have a few more cases such as what happened with Enron, and now with Vivendi -- if the confidence in the stock market is lost, and people spend less ... we could eventually face a worldwide recession."
By ELIZABETH BRYANT, United Press International