Veolia – Suez merger: the prospects of social consequences worry employees – teller report

It’s one of the mergers of the decade. The battle between Suez and Veolia does not seem to be over. Because Antoine Frérot, CEO of Veolia, is not inclined to give up his ambitions of takeover bid for Suez which would see the birth of “a world champion of the environment”. If Suez rejects all of Veolia’s approaches en bloc, Antoine Frérot does not budge. One of the thorniest points is, without doubt, the question of employment.

The 90,000 employees of Suez are worried. Since the announcement of the takeover bid, they add up the demonstrations and denounce a “dismantling” to come. Because the merger between Veolia and Suez hardly enchants them. “We started to digest, but at the start, we took it in the face”, abstract , for Liberation, Franck Reinhold, CGT secretary of the European works council of Suez. Suddenly, social relations, usually strained between the unions and the management of Suez, calmed down. All are now united against the proposal initiated by Antoine Frérot. “We don’t need Veolia to live. We are not in difficulty, we are a box in which financially all is well ”we proclaim on the side of the CFE-CGC. The management does not have enough harsh words to denounce this operation. “An aberrant operation for Suez and disastrous for France”, Bertrand Camus advance , Managing Director of Suez at Le Figaro.

Because the fears of a social tsunami are significant. However Antoine Frérot tries to reassure the personnel of Suez. “For Suez employees, there is no risk of job loss,” he says to Les Echos. But it is undoubtedly the multiple savings plans that worry employees the most. Admittedly, Antoine Frérot is known to have turned around a struggling company, in particular by tackling the group’s indebtedness. In 2010, it exceeded 15 billion euros, to stabilize around 8.5 billion in 2015. A “sustainable” level affirmed then Antoine Frérot. But at the cost of a lot of effort within Veolia. Especially since Antoine Frérot should definitively retire in 2022, when his successors will have total freedom to implement employee restructuring.

A presidency that has multiplied savings plans

While asset disposals have been the most publicized approach, the debt reduction policy has also been based on large-scale savings plans. The first one was launched in 2012 and covered the period 2013 -2015. At the heart of this roadmap, a social plan of 800 voluntary departures and 1,400 job changes. Figures to which must be added 900 departures not replaced. The result ? “A debt halved, a restoration of margins and 800 million euros in savings” greeted Antoine Frérot in February 2016. Veolia shares have also felt this, continuing to rise. A trend towards savings plans which were confirmed in the following two years. In December 2015, Antoine Frérot announced the implementation of a new plan , over the period 2016 – 2018, aspiring to a cost reduction of 600 million euros.

And the coming period seems to be part of the past trend. The 2020 – 2023 roadmap provides, again, for savings of 250 million euros per year, or one billion euros by the end of the period. At the same time, 3 billion disposals should consolidate the group’s cash flow. An economy plan to which are added cyclical measures, consequent to the health crisis. Reelected to a third term in 2018, despite opposition from American shareholders, Antoine Frérot seems determined to continue the efforts of the previous two. Last May, he launched an additional savings plan of 200 million euros which, according to the CEO of the group , “Is in addition to the 2020 annual objective of 250 million euros”.

Because cost reductions are usually associated with a reduction in structural costs and therefore, in the long term, with job cuts. What are proclaiming, in chorus, management and unions of Suez. “The 500 million savings that he (Antoine Frérot) envisions will have an impact on thousands of jobs in France,” says Bertrand Camus, who considers that “mega-mergers are synonymous with social damage”. If the CEO of Veolia promises that no social plan is planned in the event of a merger, doubts persist. It is difficult to imagine that duplicates, particularly in support functions, regional offices or even research laboratories, will be permanently preserved, if their prerogatives become, in fine, similar.

As if that wasn’t enough, another memory undermines the morale of Suez employees. The failed merger between Veolia Transport and Transdev, the disastrous consequences of which weighed heavily on the two groups.

The painful memory of the Veolia Transport – Transdev merger

In 2009, Antoine Frérot landed at the head of Veolia, replacing Henri Proglio, who left for EDF. A little over a year later, he obtained the highly strategic title of Chairman of the Board of Directors, following the resignation of Henri Proglio. One of its first projects is the management of the thorny merger between Veolia Transport and Transdev, whose ambitious objective was to create the world’s leading private public transport operator. The new structure was to achieve 10 billion in turnover in 2015. “Decided precipitously, insufficiently studied and carried out in a deficient manner” according to the Court of Auditors in its 2015 annual report, the results of this operation have indeed been disastrous.

Already because Veolia-Transport dragged with it the “ball” of the Société Nationale Maritime Corse-Méditerranée, through its subsidiary Transdev, which had survived since its privatization thanks to generous public subsidies, although insufficient to cover its chronic deficit. The social climate, then marked by repeated strikes, sometimes violent, did not help the image of a company which, in 2016, ended up filing for bankruptcy and ceding its activities to the Rocca group.

Then because Veolia Environnement, the parent company, has embarked on an unexpected turnaround. 9 months after the merger, in December 2011, Veolia Environnement decided to withdraw from the transport sector. In fact, in difficulty, Veolia Environnement then implemented a vast plan to sell certain strategic assets to try, more or less, to pay off the group’s debt over two years. A sudden change in attitude that is difficult to understand on the part of the management of Véolia, yet aware of the financial difficulties of the company at the time of the merger. “18 months ago, transport was“ the future of the group ”. Six months later, for “urgent reasons of debt reduction”, the sale of transport became vital for the future of Veolia Environnement (VE) “, wondered in 2012 a union representative.

To make matters worse, the results of the new structure are disastrous. With an estimated turnover of 8.7 billion euros in 2010, it aimed at a growth target of 5% per year. However, two years after the merger, it was only 6.6 billion. It will take several years for Transdev to regain its balance and, from 2015, to start showing positive results again. “It is an economic and financial failure in the short term, which resulted in a decline in activity and losses of the order of 1 billion euros”, curls the Court of Auditors. Antoine Frérot finally succeeded in getting rid of Transdev in October 2018, by selling his shares to the German industrialist Rethmann.

Nothing is decided yet. But, on the Suez side, social discontent rises while the management defends tooth and nail its independence. If Antoine Frérot’s promises could be of a nature to reassure Suez employees, nothing indicates that they have been heard and especially that the next presidency honors the oath taken by the current Chairman of the group.

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