The constitution of a small building material firm

7The discovery of the runoff of lime by Louis Vicat in 1818 allowed the beginnings of the modern artificial cement [3]. During the XIX^th century, new types of cements appeared. During the beginning of the XX^th, the improvement of production means led to the constitution of a cement market: the cement consumption increased in France [4]. However, plaster and lime were most used until World War I. The binder manufacturers had yet little interest in cement. This fact has been a real opportunity for Poliet et Chausson. The firm became a cement producer thanks to the huge demand caused by the reconstruction.

8One man is responsible for the success of the company: Léon Chausson. Born in Paris in 1863 into a merchant family. He studied at the Turgot school and joined the industrial environment through his marriage to a Miss Lapareillé. He partnered with his brother in law Paul Lapareillé and Jules Poliet to create Poliet and Chausson [5]. He became quickly the only effective leader. With an innate sense of business, he was considered as a demanding boss who put his work above all and wanted to control everything. In its beginnings, Poliet et Chausson was a cottage industry of lime and plaster with low incomes. The cement activity was initially anecdotal [6]. Indeed, during the 1900’s, the trade of building materials provided the bulk of the turnover of the firm. A Plaster crisis in 1904 required Poliet et Chausson to applies lower prices to stay competitive. But Poliet et Chausson had to face a lot of workers’strikes to increase their wages [7]. It has occasionally unfortunate consequences on production [8]. Therefore, a prudent policy of capital fortification was adopted. Léon Chausson waited 1908 to allow a dividend to the members of the board of directors [9]. 1908 is also the year of a first misfortune for Poliet et Chausson in its relations with the banks [10]. The firm tried to place some of its bonds for the first time. One bank assured the investment of the firm’s bonds in return of 10,000 francs. The bank [11] did not succeed and filed for bankruptcy just after Poliet et Chausson asked the compensation of 100,000 francs in case of failure. The company filed a complaint, however, it had to liquidate the debts.

9If Léon Chausson was a very careful man in the beginning, he knew also to be a bold man when needed. That will be the case during the 1910’s: Léon Chausson began to consider the advantages of cement. He saw cement as a mean to increase the average selling prices of the firm and also to reach the public market. World War I is marked by a forced slowdown but also the maintenance of technical innovations as the stone cement, created in 1916. By 1917, the company took the opportunity of the reconstruction to develop. The creation of the Gargenville plant, near Meulan, in the western Paris Basin, a cement factory with a 200,000 tons capacity [12], began even though the war was not over. This huge projet of the French biggest cement plant of the time was considered as unreasonable by its competitors. But its boldness paid off in the 1920s. Poliet and Chausson became one of the most important cement companies in France. To conduct its investment policy, Léon Chausson needed growing capital. He then naturally turned to the banks.

The growing capital needs of a young heavy industry

10Once, the lime burner equipment was relatively cheap. But during the war, cement replaced lime and the technical progresses [13] in the Portland cement production turned the cement fabrication into a heavy industry. Dealing with a large tonnage of poor materials with increasingly mechanized, complex and expensive facilities, the cement producers needed to increase their capital. Léon Chausson turned to the financial groups for support. The banks would gradually take a strong position in the management of the firm.

11The war stopped the firm’s activity during two years. Then, 1916 is the year of the first steps in the financial and industrial world for Léon Chausson. During the Extraordinary general Assembly of December 1916, he announced that a financial group, the Consortium du Nord, asked Poliet et Chausson for help to create a Portland plant [14]. In return, Léon Chausson asked the Consortium du Nord for help to increase the share capital of the firm from one million to four millions francs. This capital increase was allowing Poliet et Chausson to lead a M&A policy and to build new cement plants. Indeed, in 1916, Poliet et Chausson began to absorb a lot of little binder companies [15]. From this time, there would be a lot of capital increase and call for subscription. This quick growth of the society allowed the turnover to grow swiftly [16].

12Between 1916 and 1926, the capital increased from one million to 40 millions francs. This quick rise arouse the financial papers to mistrust Poliet et Chausson during the 1920’s [17].

13Some financial journalists suspected that the capital increase gave away the firm takeover by financial groups [18] as the Consortium des Ciments. They noticed that the firm extensions were more beneficial to the board of directors than the shareholders: the allocation is made to the following conditions: 5 % to the legal reserve, 6 % interest to shareholders, 10 % of the surplus to the Council, a 10 % to its disposal, 70 % equities, 10 % of shares to founders and the directors also receive attendance fees [19]. The unit holders soon considered these conditions as too advantageous for the board of directors.

14Soon, a dispute erupted between the board of directors and the unit holders. The founders’ shares were entitled to a portion of the profits of the company but did not constitute a property right on the capital, except possibly on the right of liquidation. They did not give a decision power in the management of the company. During its General Assembly on 29 April 1927, the firm voted that the distribution of ten francs per share should be levied on the premium amount of emission. The shareholders asked for a modification of the status to clarify the fact that they were the only owners of the premiums shares [20]. The refusal of Léon Chausson triggered a process from the Unions of unit holders. The trial, held before the Commercial Court of the Seine lasted many years [21]. The dispute with the shareholders seemed to find a solution on February 24, 1930. The first chamber of the Court of Appeal confirmed the judgment of the Commercial Court of the Seine and dismissed the shareholders. Although Poliet et Chausson was finally victorious, its image was permanently modified. David became an industrial Goliath. He now raised the suspicion of little shareholders and appeared as a financial group more than a cement producer.

The birth of financial groups establishment

15The downturn of 1927 led a demand fall that created a production drop and then a turnover diminution. However, the effects of the downturn disappeared very quickly. Unlike the board of directors of Lafarge, who decided cautiously to constrain their investment after 1927 [22], Léon Chausson was very confident in the future and chose to continue his expansion policy. He believed that the construction market would always be a strong market. That’s why he decided to create a new financial group similar to the Consortium du Nord to administer a part of its numerous subsidiaries, the Financière des Ciments. The Consortium du Nord and the Financière des Ciments held respectively 30, 000 and 40, 000 shares of Poliet et Chausson. The interest of the financial group is a double one. Firstly, it alleviated the portfolio of Poliet et Chausson and the Consortium du Nord and avoided the fear that their securities market was disrupted by the realization at the wrong time of large blocks of shares. It permitted also to sell with profit the shares of the holding society. For example, the Consortium du Nord, who had taken the precaution to provide the Financière des Ciments with multiple voting shares could well resell at 150 francs to 200 and above the shares of its subsidiaries while keeping control of the business [23].

16Much has been written on the financial arrangements around Poliet et Chausson in the financial newspapers [24]. A certain number of journalists blamed Poliet et Chausson for its huge capitalization [25]: more than 650 millions of francs in 1930. For them, it was far too much, the stocks prices artificially inflated because of the huge demand of the 1920’s during the reconstruction. And indeed, the crisis of the 1930’s had serious consequences on the firm’s capitalization.

17Despite, this financial arrangements allowed Poliet et Chausson to become the first French cement firm during 1930. But, the effects of the 1929 crisis on the construction sector would be fatal for Poliet et Chausson. The takeover by the bank Lazard and Brothers to avoid bankruptcy rings as the announcement of troubled times for the firm.

The Lazard and brothers’ takeover

19In 1932, the construction sector knew a 30% decrease of its activity. This fact had for consequence that the cement lost 20% of its value during 1933. In this context of demand reduction, the necessity to invest in increasingly large cement plants to have lower prices and stay competitive led Poliet et Chausson to its loss. Its industrial program was too ambitious and the firm had taken major financial risks that reduced capital and financial availability. For example, the huge project of Lormont cement plants near Bordeaux is completed and the factory is put into operation in 1932.

20With the effects of the crisis the firm could not pay its debts in 1932. Léon Chausson had to call the banks for help to avoid bankruptcy. Lazard and brothers accepted to save the firm provided they took the control of the board of directors. Poliet et Chausson broke up with the Consortium du Nord and ended the Financière des Ciments. Lazard and Brothers maintained Léon Chausson at the head office but they replaced seven members on twelve in the board of directors [26]: M.M. Elby, Dupleix de Frouville, Le Goaster, Lévy, Vandewalle et York were replaced by Paul Frantzen Jacques Aguillon, Louis Marlio, Jean Maroger and Guillaume de Tarde. This takeover went again the wish of Léon Chausson to let the firm to his son and to build a family business. Indeed, since 1918, he has introduced his son Henri Chausson on the board of directors and also let at the same time the management of his fraternal benefit society to his daughter Marcelle Chausson. He died shortly after this takeover and let the fruit of a lifetime of work in the hands of Lazard. This is the beginning of the decline of the society. The new majority shareholder conducted an audit that revealed an overestimation of the portfolio of 29 millions francs. Paul Franzen, a man from Lazard, succeded to Léon Chausson as C.E.O. in 1933 and led a strict apuration policy. The accounts were adjusted and the investments were reevalued downwards. From 1932, a depreciation of 29 million francs is performed on the stakes by deduction from the firm’s reserves [27].

During the 1930’s: a large financial trust?

21

Poliet et Chausson (…) is no longer a family affair but a matter of banking groups. Also, the industry share issues will become more important than the cement industry! [28]

22The author of this sentence, Pierre Lenoir, member of the labor organisation of the Public Work and Building Materials Federation [29], depicted Poliet et Chausson as a financial trust in 1937. He denounced a megalomaniac absorption policy out of proportion with the industrial potential of the firm. According to him, the artificial swelling of the capital was responsible for the financial market instability of its securities. Indeed, the share prices fluctuated a lot. While stocks have earned up to 3750 francs, they were worth 340 francs in 1937. The shares rose from 30,600 francs in 1930 to 1865 francs in 1936 [30].

23The pamphlet of the federation highlights the collusion between Poliet et Chausson and other banks and financial groups. A sketch summarizes the tree of relations between them [31]. It highlights the fact that a lot of men of the board of directors were in other board of directors: Lazard and Brothers as Daniel Serruys, Jean Maroger or Guillaume de Tarde, the Credit Industriel et Commercial for Mister de Fréville de Lorme, the Credit Lyonnais for Pierre Gillet and the BNCI [32] for Mister Grillet. The graph also shows that the relationships are strong between Poliet and Chausson and powerful industrial groups as Alais Froges-Camargue, the master of aluminum in France and one of the main leaders of the trust of electricity. Indeed, MM. Maroger and Marlio and the Gillet family were in the two companies.

24Since 1935, Daniel Seruys is the C.E.O. of Poliet et Chausson. He replaced Paul Franzen after his unexpected death. The man is an industry captain. During the 1920’s, he was director of trade agreements at the Foreign Ministry representing the interests of the Lazard Bank at Citroën. In 1937 he was the president of the FCSFCCF [33] (Trade Union Federation of Chambers of Lime and Cement Manufacturers). The war disrupted the positions of Lazard inside Poliet et Chausson. During march 1939, Daniel Seruys is called to the Office of High Commissioner to the National Economy. He left the presidence and Henri Chausson, vice C.E.O. provided the interim. During the occupation, in november 1940, Henri Chausson became C.E.O. Although this change gave the appearance of a return to family continuity, the war and post-war period brought a lot of turbulence to the firm.

From one bank to another

25During the 1940’s and 1950’s, various financial groups were fighting to extend their influence inside Poliet et Chausson. Few archives are related to the troubled occupation period. The war ends the collaboration between Lazard and Poliet et Chausson. In 1942 an important agreement is signed with the Banque de l’Union Parisienne [34] to replace Lazard. Mister Levet, administrator in the BUP, became then vice C.E.O. of Poliet et Chausson. What conclusions can we draw from the action of these financial groups within the company ? The study on the cement industry conducted by the BPPB in 1968 is very severe against them [35]. These banks were accused of having only served their own interests by placing their men in the board of directors. They were also blamed for never bearing any financial risks, for taking high salaries unrelated to their poor services and moreover for imposing to Poliet et Chausson a real “financial prostitution » [36]. For example, the company had to take paid options on land belonging to certain shareholders, these options would of course never lifted and allowed large payments [37]

26The events that followed the Liberation led to the substitution of the board of directors by a team set up with support from the Works council. Henri Chausson had been struck by national indignity and was forced to leave the company because of his attitude during the war. At first, his brother in law, Raoul Kern, a man of consensus, was chosen to replace him, but his health problems forced him to let the presidency to Pierre Gillet, member of the board of directors since the 1920’s. During theses years, the board of directors ‘difficulties to face the staff’s claims undermined the firm. Under these conditions, it was difficult for many technicians of value to do their job and the company suffered the resignation of prominent collaborators as M.M. Caillette, commercial director, Lecœur, staff chief, and Lofficier, technical director. They left Poliet et Chausson for Lafarge. M. Dherse, technical director, went to Sollac.

27During this troubled times, not any major investment decision was taken. The industrial assets grew older while competitors such as Lafarge or Ciments Français were renovated and developed even if the firm has still a solid fund and an excellent commercial position. It is also significant to note that before joining Lafarge Marcel Demonque would have considered taking the general direction of Poliet et Chausson. The progressive weakening of the company put it at a new takeover risk by a foreign financial group. The solution adopted in order to escape the takeover would definitely stop the firm’s evolution.

The shadows of competitors (1954-1969)

29In 1954, an event disrupts the management strategy. A foreign financial group, the Northern European Bank [38], buyed fifty mille shares of the group and asked to enter the board of directors via M.M. Igoin and Fastou [39]. At the time, the quorum was not reached at the first general meeting on, so the entry of MM. Igoin and Fastou allowed the Northern European Bank to take the control of the firm. To overcome this danger, Pierre Gillet, the C.E.O., wanted to strengthen the independence of the company. He decided firstly to move closer to its competitors and secondly to seek support from a powerful financial group.

30So, after a lot of negotiations, in 1954, the cement firms Lafarge and Lambert and the financial group CGIFE [40] entered the board of directors. Various agreements of primary importance on the future of the company were signed between the group and its majority shareholders. The convention of the 29 July 1954 between the shareholders and Poliet consolidated the position of Pierre Gillet as Chairman and called for a management agreement between CGIFE and Poliet et Chausson and the nomination of Robert Delaume as general director [41]. The convention of the 29 July of 1954 between CGIFE and Poliet allowed an industrial and financial support from CGIFE in return of a remuneration of 2 % of the turnover off duty during ten years [42]. This agreement recalls the past practices of Lazard and the BUP. Indeed, the CGIFE received more than 4 millions francs between 1954 and 1964 without any real counterpart. The convention of the 29 July set also the distribution of participation between the shareholders. CGIFE owned 5.67 %, Lafarge 5.23 %, Lambert 4.26 % and BPPB 2.84 %.The convention allowed also BPPB to strengthen its position inside Poliet et Chausson. By foreseeing a financial advisor from BPPB to assist the board of director. BPPB became also the first bank for Poliet et Chausson.

31However a confidential agreement between CGIFE and Lafarge signed the 10 December of 1956 darkens the future of Poliet et Chausson. A conciliation agreement between the two signatories had to be hold for all Poliet et Chausson new investments which should be “harmonized” with those of Lafarge. Even more, the CGIFE promised to prevent Poliet et Chausson’s projects that could undermine the position of Lafarge in specific areas. A coordinating committee between CGIFE and Lafarge had to study the outline of Poliet et Chausson industrial policy. From this time, Lafarge was aware of any new plant and prevented Poliet et Chausson the access to attractive markets. Then, the company was confined to traditional areas of action and its industrial policy limited to the only renovation of existing units. With its most serious competitors in its board of directors, the future of the company was seriously burdened and had dramatic financial, industrial and commercial consequences.

The BPPB takeover (1968-1971)

32In 1968, when BPPB bought CGIFE, the bank became the majority shareholder with 15 % of the capital. Hitherto, the cement firm was considered by the bank as a CGIFE matter and the industrial department never interested in Poliet et Chausson. The bank decided to make a thorough study to understand the problems of Poliet et Chausson and to invent a new strategy [43]. The study pointed out the shortcomings of the production equipment and serious technical problems, a continued deterioration of the cement and plasters market positions [44].

33The bank realized that the company has been steadily declining since the 1930’s. In 1932, indeed the firm owned a large industrial field including eleven cement plants with a 2 millions tons capacity, fourteen plaster plants with a 500 000 tons capacity, ten lime plants with a 320 000 tons capacity and four brick plants with a 40 000 tons capacity. Moreover, Poliet et Chausson owned thirty two deposit sales of building materials and twenty two of them were in the Parisian Basin. In 1969, the society was at the head of three cement plants with a three millions tons capacity, one plaster plant with a 330 000 tons capacity, one special products plants and thirteen sale deposits. The figures of the following table set the light on the society decline between 1930 and 1967.

34Alongside, the company’s profitability did not improve, as shown on this table.

35In 1968, Poliet et Chausson was the third French producer of cement with 12 % of the production behind Lafarge (30 %) and Ciment Français (20 %) and in front of Vicat (7,5 %). Poliet et Chausson was also the third French producer of plaster with 13 % of the national production behind Lambert (29 %) and Mussat (14 %). Poliet et Chausson produced 25 % of the market in 1930. To explain this decline, the report of BNP Paribas pointed out of failure of government since Léon Chausson death and the financial group responsibilities. This has resulted in a lack of long term policy and a growing mismatch between the firm structures and the market realities.

The end of the cement business

36To restore the cement firm that was now under its control, the BPPB initially decided to promote the necessary reforms. This attitude required considerable funding. It nevertheless seemed to be the best long-term effective solution. BPPB took two years to restore a sound management before considering a solution of total or partial sale. In 1969, Louis Monteilhet and Raymond Poitrat were respectively nominated C.E.O. and vice C.E.O. They conducted a rationalization policy to improve the profitability. They also led a Merger and Acquisition policy. Three building material firms, the C.I.C.M [46], the Ets Susset and Trouillard were absorbed in return of equity portfolios. It was an effective policy for the sale deposits. Their turnover improved of 20 % between 1968 and 1969. The renovation of the binder plants was more difficult. After two years, the BPPB finally decided to sell the cement part of the firm to Ciment Français in 1971. This is the end of Poliet et Chausson as a cement producer and the beginning of Poliet S.A., a holding animating and controlling a wide range of participation in the field of construction industries.