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Bouygues

Bouygues

381 Avenue du General-De-Gaulle
Clamart Cedex
France 92142
33-630-23-11

Private Company
Incorporated:
1952
Employees: 15,900
Sales: FFr45.02 billion (US$7.00 billion)

The rise of Bouygues in the French construction industry may be attributed to the personal attention its founder has given to each of the companys projects. Francis Bouygues (pronounced Bweeg) has built his company through dedication and a commitment to expansion. The company has completed numerous large-scale construction projects both in France and around the world and, while the industry is currently weathering a recession, Bouygues has been able to maintain its growth by pursuing more diverse and profitable lines of operation.

Prior to 1952, Francis Bouygues worked alongside Eugene Freyssinet, a construction pioneer who revolution-zed the industry through the introduction of prestressed concrete. With a sense of vision inspired by the works of Freyssinet, and an entrepreneurial spirit which would become his trademark, the young engineer used a $1700 loan acquired from his family to set up a small firm which operated from his apartment.

Much of Bouygues work lacked the glamour of his future achievements. Yet Bouygues immersed himself in every aspect of his business, from driving a truck to managing construction sites. His first construction jobs included the renovation of old factories and pre-dawn repair work at the Lido cabaret.

It was not long before Bouygues had made a name for himself; positive trends in the industry afforded Bouygues many opportunities to demonstrate his business acumen. To ensure the ready identification of the companys projects, Bouygues became one of the first firms to paint its equipment uniformly in one color, minimum orange.

As the construction industry expanded during the 1950s and 1960s, due mainly to large public works projects, the rate of employee turnover became problematic. Competition among companies to hire workers was so acute that employees of Bouygues worked an average of only six months. In order to halt this trend, Bouygues created an elite corps of workers in 1963 called the Compagnons du Min-orange. Identified by the company color, this cadre of membership-only employees displayed greater dedication to the company, were less likely to leave Bouygues, and asked for fewer salary increases.

Membership in the Compagnons requires nomination by a site manager and approval by a committee of Compagnons. Only one in ten nominees gain admittance. Members of the corps wear uniforms with badges or stars indicating rank. Although membership assures job security, members can be demoted, should they prove unworthy of their rank. Compagnons are rewarded with long weekend holidays to such vacation spots as Sardinia, Istanbul, and Dubrovnik. Bouygues plan has worked well; employee turnover decreased noticeably.

With a force of committed workers in place, Bouygues proceeded to make impressive gains in the industry. During the 1950s and 1960s the company erected several subsidized housing projects in Paris. The companys first large-scale project was the Parc des Princes soccer stadium, awarded to Bouygues in 1969. While the contract marked Bouygues entrance to the higher ranks of the industry, Francis Bouygues enthusiasm failed to conceal a certain degree of inexperience.

An extremely complex design, combined with the need for custom-made precast concrete, threatened the project from the start. When the first column erected began to slide, a school near the construction site was evacuated. With his reputation at stake, Bouygues quickly assumed personal control of the project and instituted corrective measures. When the project was completed (ahead of schedule), Bouygues profit from the job was negligible. However, Bouygues earned great respect for its efforts, and soon new orders began to accumulate.

Unlike industry competitors, Francis Bouygues insists on complete control of his projects. And even though he was compelled to form partnerships on several occasions, he nevertheless avoids these arrangements as much as possible. In one instance, a joint highway contract placed Bouygues at one end of a road and the companys partner at the other end. Joint work commenced only when the two roads were connected.

Another example of Francis Bouygues management style is shown by his decision to create a company union in 1968. This came at a time when the industry was plagued with labor disagreement and strikes. As members of a separate union, Bouygues employees never joined these strikes. Bouygues later encouraged his employees to gain affiliation with the Force Ouvriére, a politically conservative nationwide union, largely opposed to the more militant Confédération Genérale du Travail. Force Ouvrière organized many of Bouygues employees, although as late as 1982, 70% elected to remain exclusively with the company union. Even more significant than its lack of union organization, Bouygues employees have very few grievances; all are generally well-paid.

Bouygues successes in and around Paris continued to grow as the company completed power plants, an airport passenger terminal, a conference center and numerous skyscrapers. By the mid-1970s Bouygues announced plans to expand on two fronts: in the remainder of France, and overseas. Domestic operations centered on the private home building industry. The Maison Bouygues division built homes to satisfy individual tastes at inexpensive prices. By the early 1980s Bouygues had become the largest home builder in France.

The companys late entrance into overseas markets compelled Bouygues to bid lower than its competitors for an Iranian contract to build the 1974 Asian Games stadium in Teheran. Bouygues price was 30 to 40% less than those of larger industry veterans such as BechtelBouygues won the contract. This project led to further contracts to build residences in Iran and to perform repairs on the Shahs palace. Using the revolutionary concrete truss design of the Asian Games stadium, Bouygues went on to complete the 1.5-mile Bubiyan Bridge in Kuwait. Business expanded to Iraq, where the company constructed a nuclear power plant (destroyed by Israeli bombing in 1984). In addition, Bouygues constructed a mosque in Jeddah, Saudi Arabia. Outside the Middle East, the company secured contracts to build power plants and universities in West Africa.

As eager as it was to enter foreign markets, Bouygues was prevented from doing so by strict financial policies which were intended to protect the company from losses in unstable countries. Francis Bouygues refused to work on credit in these high-risk markets, and always remained ready to leave them on short notice; during the Iranian revolution in 1978, Bouygues moved out without incurring any losses.

One exception to Bouygues reluctance to work with partners came in the late 1970s, when the Saudi Arabian government opened bidding for the construction of King Saud University in Riyadh. Bouygues desire to maintain his independence was overridden by his ambition; when the Saudi government informed Bouygues that his company was too small to win the contract alone, he formed a partnership with Alabama-based Blount, Inc. Still, Bouygues insisted on a 55% controlling interest in the partnership, which gave him the final approval in all decisions. The 40-month deadline set by the Saudis for the completion of the project discouraged most bidders. By the time the $2 billion contract was to be awarded, all but two contenders had dropped out of the competition. When the contract was finally awarded to the Bouygues-Blount partnership in 1981, it was the largest fixed-price construction agreement ever. Because the two companies stood to lose money if the construction fell behind schedule, Bouygues and Blount completed the project on time and collected an additional $50 million windfall.

Bouygues entered the 1980s with impressive financial credentials and great prestige. Yet changes in both the French and world economies forced the company to change its business strategy. High interest rates, falling oil prices, and a shrinking construction market forced Bouygues to reduce its work force. President Fran¢ois Mitterands social policies reduced the amount of government funds available for large public works projects. To compensate for the changing economic conditions, Bouygues was also forced to alter its financing methods for overseas projects; the Nigerian government paid the company four months late for a $620 million power plant.

Bouygues initiated a program of diversification in order to mitigate the effects of the beleaguered construction market. An attempt to purchase Druout, a French insurance company, was thwarted when that companys former owners sued to halt the takeover. Later, Bouygues acquired a 55% share of Amrep S.A., an oil services company. In an attempt to broaden its presence in the United States, Bouygues purchased a number of engineering firms and re-organized them as an Omaha-based consortium called HDR, Inc. A larger holding company, called the Centerra Corporation, was also formed to perform work in design, engineering, financing, and construction. Centerras first large project was construction of the New World Center in Seattle.

Other successful acquisitions included operations in offshore drilling, electrical engineering, battery manufacturing, retailing, and water services. However, the largest of all Bouygues purchases was in the area of construction. Frances second largest construction group, SCREG, accumulated a massive debt which made it vulnerable to a takeover. With the addition of SCREG, Bouygues revenues increased to nearly $7 billion. Through SCREG, which is operated as a subsidiary, Bouygues became involved in the road construction industry.

As Bouygues continues to expand, industry analysts have raised the question of the companys future without its assiduous founder. In 1986 many believed Bouygues eldest son Nicolas was being prepared to assume leadership of the company, but he suddenly left his fathers firm and started his own business. Three other children, including Bouygues daughter are currently employed with Bouygues. Still, the question of succession remains largely unanswered. Although he has lost a lung to cancer, Francis Bouygues has yet to reduce his work load.

Recently, the company failed to take over Spie-Batignolles, a large French contractor in which Bouygues claimed it had an original 10% interest. Not only was the attempted takeover particularly acrimonious, it resulted in an inquiry in which Bouygues was accused of failing to declare a major corporate interest. [French law requires investors to declare any corporate interest in excess of 10%.] The Commission des Operations de Bourse, the French stock market regulatory committee, later charged Bouygues with failing to declare a 24% interest in Spie-Batignolles.

In April of 1987 Bouygues and a consortium of private investors acquired a controlling interest in TF-1, the leading French national television network. In order to augment its minority share of CGCT, a French telecommunications firm, Bouygues announced plans to expand into the radio telephone market. Bouyguess entry into the broadcasting and communications industry came as its offshore oil operations registered significant financial losses. This diversification effort promises to be Francis Bouygues greatest challenge; the entrepreneur has not excluded the possibility of entering the publishing industry. How successful Francis Bouygues will be in an industry so different from his original construction business remains to be seen.

Principle Subsidiaries

GTB; Kesser; Mistral Travaux; Norpac; Enterprise Quille; Elan; GFC; GTFC; GCA; Les Longs Reages; SCREG; HDR, Inc.; Sam Clam; Bafir; Bouygues Offshore; GIE CIG; Bisseuil; Texim et Cie.; Pertuy; Stim; Bouygues Iran; SETAO (74.37%); Univest; Revex; Etudes et Prefabrication Industrielle EPI.

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