The smaller you are, the more you take it all in the face. Managing 10 people is much more complicated than managing 4,700 people.
Pierre Gattaz led the MEDEF, but above all he has been piloting for 35 years an industrial mid-cap company of nearly 500 million euros in turnover with 13 factories worldwide, including four in France. In this episode, I wanted to understand why the former boss of bosses rails against a system that discourages those who undertake.
I feel like I'm financing people who insult us all day and want our death because I'm tired of being intimidated, tired of being insulted, really tired. So I decided to respond eye for an eye, tooth for a tooth. So when someone insults me or us, Mr. Bompard, Mr. Cockrel, etc., we'll have to go after them.
But it's quite a coincidence because we were talking about Carlos Diaz and Carlos Diaz walks into the room. Anyway, Carlos told me something interesting when we did our episode, he said 'If LFI or the RN wins, I'm coming back to Paris' because he lives in San Francisco. He said 'I want to see the show.' It's crazy what we have under our feet. And you have guys with no vision, who want to tax all day, who don't want to do a bit of economics, who mistreat us. Let us work but stop bothering us all day. Stop piling on huge things. What I see is a huge French market. We are an incredible engine, we are a Ferrari in every area I see, but we have our foot on the brake.
Is the 2027 election the last chance? Who is the best candidate? Who is it, Pierre? Does he want to tell us?
All the candidates, I would like...
You, are you used to TV sets?
No. Yeah, a little. Yeah. Yeah. Yeah. I don't do too badly. Yeah, I do a little. Yeah. Not yes, I do.
But the last one was 'Complement d'enquête'. No, that was in September. That was in September. And since then I've done... since then there was the dissolution, there was all the political stuff, the budget preparation which was unbearable and on which... and then my book came out. So I was invited by LCI, by France Info, etc. The most delicate confrontation was 'Complement d'enquête'. Well yes, because it was a bit biased. It's the 200 billion in public aid for businesses. What do you do with it, Mr. Gattaz? And why so much money, etc. So I had to explain that it wasn't... that it was... that it wasn't... actually we had 200 billion that were aid to SNCF, RATP, EDF. So reduced VAT rates. There was all sorts of things. So first I had to explain that it wasn't 200 billion in aid to businesses. And secondly, especially, I wanted to get to the point: stop giving us aid, lower taxes, give us... lower us, give us a competitive tax system and you'll see it will work wonderfully and we'll stop aid except for innovation. Research tax credit is yesterday. We need to safeguard that thing. It's 7 billion a year. It's not huge but all countries in the world fund their research and innovation.
And 'Complement d'enquête' didn't agree with that? They listened but they pushed back saying but this but that, but we give aid to people to do social plans. So they cited a few companies that took aid and then laid off.
Well, they listened and they pushed back saying but this but that, but we give aid to people to do social plans. So they cited a few companies that took aid and then laid off. But after that, it's life, it's the market economy. That is, the market evolves. When you have a Covid on March 13 which was unpredictable a month before, what do you do? You are forced to adjust, etc. So I think that when the state distributes aid, you have to accept that sometimes, unfortunately, it doesn't work as we imagined. But that's why I say let's not give aid. Except for very specific things. It's true that during Covid, all countries in the world helped their economy. Well, we did it in a top-down manner from the state and we sprayed everyone. In Switzerland and Germany, they did it canton by canton, studying those who really needed it.
And 'Complement d'enquête' didn't agree with that.
Well, they listened and they pushed back saying but this but that, but we give aid to people to do social plans. So they cited a few companies that took aid and then laid off. But after that, it's life, it's the market economy. That is, the market evolves. When you have a Covid on March 13 which was unpredictable a month before, what do you do? You are forced to adjust, etc. So I think that when the state distributes aid, you have to accept that sometimes, unfortunately, it doesn't work as we imagined. But that's why I say let's not give aid. Except for very specific things. It's true that during Covid, all countries in the world helped their economy. Well, we did it in a top-down manner from the state and we sprayed everyone. In Switzerland and Germany, they did it canton by canton, studying those who really needed it.
But it's true that this aspect of lowering taxes and stopping subsidizing businesses. I had Alain Madelin on my podcast not long ago who said we need to do a big clearing of all that because businesses are heavily subsidized and at the same time heavily taxed. So we need to readjust, simplify the model. And he also said that the problem with subsidies, at least what he observed as Minister of Industry and then Economy, is that France tends to subsidize the bad ones. That's a phrase that got a lot of reaction on my networks. France subsidizes the bad ones. It takes from the bad to give to the good.
It takes from the good to give to the bad. We are in a very particular French world. In fact, we want to be forgiven for everything we take from businesses. So for 40 years, we have increased social charges, employer contributions, taxes, and to be forgiven somehow, the state gives us subsidies. So it's completely paranoid and schizophrenic. I think like Alain Madelin that we really need to reduce all aid as much as possible. Business leaders need to stop holding out their hands. I tell my fellow business leaders, stop holding out your hands because you'll get higher taxes behind it, and especially when you have aid, you have civil servants who give you aid, monitor it, control it, right? You have tons of paperwork too. So it's crazy. We need to simplify to death. And except for a few cases, I say research tax credit, innovation must continue to be funded because research is long-term. And one-off aid like Covid, it's true that a horrible thing like that where everyone stops, we were made to stop because we could have continued but the state said stop everything, and then you need to be helped, but not in a statist way. It's special aid. And then we need to accept Darwinism, accept the fact that some companies will fail, will bounce back. If we are in a bad market, we file for bankruptcy and then we can create a new company. I think that's the nature of managing a market economy, which is linked to risk-taking. An entrepreneur takes risks, and success is 51% success, 49% failure. By talking to you, I'm taking risks. I take risks for Radial. I take risks for my vineyard. I know we make investments that may not work. The idea is not to go down at the end and not to ruin the shareholders, so we take measured risks. But when you are a young entrepreneur, the state and administration need to understand that there is risk.
Speaking of risk, I'm going to ask you the question I ask all my guests on this channel. When was the last time, Pierre Gattaz, you felt naked and without a net?
It's every time I've had... you know, in 35 years of piloting Radial, I've had four major crises to manage, hard crises. In 92 when I arrived... sorry, but Radial is your family business that sells electronic components to the military, for aeronautics, for the military, for telecom, for medical, etc. It's a company that does almost 500 million euros in turnover. Family business created by my father and uncle. I've been with them for less than 30 years. I arrived in 92, we did 70 million. I had four factories in France, now we have 13 total, but four factories in France are still there. They are twice as big and we have 3,700 people total, half of the workforce in France but we export 90% of our turnover abroad. So we moved upmarket a lot. We moved upmarket and my French engineers, workers, etc., we made progress to face considerable challenges. So all that to say I've had four crises in 35 years and inevitably in the next 7 years I'll have another crisis. It's inevitable. The first was the fall of the Berlin Wall because military markets were declining. So I had to restructure. And 89, you weren't there yet? 92 is after, actually 89 and just after, military budgets gradually collapsed. I'm like for 'Complement d'enquête', I have to be careful, I'm very precise.
Well, thank you for that precision. So 3 years later, you take it in the face because markets and budgets decline. So you had to reposition. So the rebirth, we went full speed into telecoms in great turmoil and then boom. So we had 10 years of very strong growth with Ericsson, Nokia, Alcatel and all the friends. And then boom 2000, the internet bubble, 2001 the internet bubble bursts. So I lost 2 times 25% of my turnover. 2 times 20% of my turnover in 2 years. Terrible. So again I had to manage that. So we went full speed into aeronautics. Boom, Lehman Brothers 2007-2008, all markets down, it started again. And then 2020, Covid, there aeronautics activity at Radial was half of my turnover which dropped by half, so I had to manage a 25% drop in turnover very hard for 2-3 difficult years. There, you are naked. There, you are without a net. There, you say to yourself, we are not well. Because you have to preserve cash, preserve people, preserve the company. It's a company and there is no visibility. When you tackle a crisis, you don't know if it's for 6 months, 1 year, 2 years, 3 years. The one in 2001 lasted, it's a long crisis. It lasted 2-3 years before I repositioned, made another leap, etc. And 3 years is very long. You must not manage a crisis in 3 years, you must manage it in 1 year, 2 years maximum, 3 years is complicated.
Have you been afraid several times of closing the doors?
Well, you fear for cash, you fear for people, you fear that the plan you make is not enough, that you will have to do a second one, which is a mistake. Already making a plan, it's a social plan, it's complicated. You have colleagues you have to let go. I always tell my employees, I cannot guarantee you a job for life. On the other hand, I guarantee you employability. That's very important because if one day a new Covid arrives, I am forced to lay you off or you decide to leave, well I will have the pride or rather the presence of mind to tell you that you will find a job fairly quickly within 6 months, a year, etc., that you won't be unemployed for 3 years. That's what I want to avoid when I manage my men and women. So indeed, I train them all the time. I train my workers in polyvalence, etc., and I make them progress. And that's very important for them and for me. And indeed, when a crisis comes, they know that there may be 5% of the workforce that we are forced to let go, and we do it very humanely. We give support, we try to accompany as much as possible. But you see, that's part of the hardest things to do when managing a company: managing human resources. Strategy is one thing, it's great. Managing cash, well you have to manage cash as best as possible, etc., but it's cash. Managing suppliers or customers, very important, customers fundamental. Managing suppliers to support you, very important. But managing these men and women in a family business is extremely important. So we strive to do things in a very volatile moment.
What are you most proud of in this company, this 35-year adventure?
For me, it's having kept my four French factories at Radial when I arrived. There were four in total. Now we have 13, but the four fundamental French ones are twice as important. I added a fifth in France in Dole in the Jura which does precision mechanics. I'm in the process of adding a sixth for surface treatment near Moirans in Isère which will be a great thing for surface treatment. Surface treatment is everything that puts silver, gold on contacts, on connectors, etc., because we talk about connectivity, so there are materials to ensure extreme connectivity, to protect mechanically, to protect electronic components. So it's what we call electroplating, surface treatment. So these are very chemical, very complicated things. They are flashes. Well, we tried to do that in France because it's one of the core expertise of Radial. And we are also in the process of negotiating a joint venture with Foxconn and Thales to create a subsidiary, a joint venture to make semiconductors, actually the equivalent of semiconductors not as advanced but for future electronic components, smart connectors, intelligent connectors. And you see all that is industry, and my greatest pride is having kept my factories, developed them with my teams, made sure we moved upmarket, did it in France, and 90% of Radial's excellence in the world including in China, including in the United States at Boeing which is a big client, comes from France. So we are capable of doing industry in France, we are capable of keeping people, we are capable of motivating them, but we will be even stronger if the environment in France is even more business-friendly. That is, we still get annoyed with standards, codes, things that are very complicated to manage. So my fight elsewhere is to say 'Let us work, stop bothering us all day with codes, stop piling up standards, stop bothering us with tons of things.' And I believe that is a second fight, so that we continue to develop in France, so that there are new start-ups, we need to integrate that we will have to move towards a tax system that I call competitive. We need a competitive tax system, a combat tax system to globalize and keep our teams, our workforce, and our talents in France. And then we need a competitive administration, that is, with adapted standards.
400,000 standards, they say.
Of course, and we are champions of standards because we transpose and tighten European standards, European directives. So if you want, at some point we will need a President of the Republic, a team that plans a program that they explain to the French with a vision because I think a lot about vision. In a company, we have a vision. We tell them in 5 years we want to be there, in 10 years we want to be there. We explain it to our collaborators, we bring them on board as much as possible. And then we roll out the plan. There is no vision in France today. There is no candidate. There is no program. I haven't heard 2030 we will be there, 2035, 2040 we will be there. The Chinese, communists as they are, have visions for 50 years of their country and they roll it out. Well, I'm not at all communist, but there are some reflexes we could take from the whole world.
My challenge, Mr. Pierre Gattaz, will be to interrupt you because I feel you are very strong. It shows that you are seasoned. My question though, because we are going to talk about 2027 obviously, about taxation, solutions. You also have a think tank on these questions, so there are many things. And how can 2027 give power back to the France that works, to people who want to move, who want to succeed and make this country succeed. But nevertheless, to come back a bit to Radial and particularly to industry, you are a family business, so 99% of the capital I think belongs to your family. We were on the stock exchange and we bought back the shares from outside. The stock exchange was useless to us.
But it's crazy because, moreover, I think I'm not mistaken in saying that the biggest stock market successes, particularly in France, are often family businesses. It's Hermès, it's LVMH, it's companies like that. Yes, we manage over time. Family businesses manage the long term. So to manage the long term, we take care of our teams as much as possible, as best as possible, and we take care of the environment. We are very virtuous because we are not going to pollute, throw waste, etc. So we are very careful to last. In English, it's 'built to last'. Great. But what interests me is that 99% of the capital at your size, that means you managed to either make all external investors leave, for example IPO, you bought back the shares, etc. Why this choice of independence? What does independence mean to you?
Stop! An insert in your episode. I accompany dozens of entrepreneurs who make several million euros in turnover and yet I have neither founded a unicorn nor paid for a 25,000 euro training at HC. My clients are bootstrap entrepreneurs from 500,000 euros in revenue. They don't pay me for that. They pay me because I know by heart what keeps them up at night, what wakes them up at 4 a.m. The feeling of not being up to the task, the decision they have been putting off for months, the loneliness that no one understands. For my part, I've been in this ecosystem for 12 years. I've rubbed shoulders with the best CEOs intimately through my entrepreneur club, recruitment, individual and group coaching, and through this media. Above all, my clients value the fact that my support is uncomfortable. One client realized she was poorly surrounded, changed her executive committee, and finally succeeded in her business pivot. Another finally decided not to raise funds under bad conditions. Finally, one dared to confront his intrusive father and finally took on his CEO hat. So if you have a subject that is blocking you at the moment, Ping and I would be delighted to discuss it. See you soon.
I created a club called the Bootstrap Club. It was for entrepreneurs who want to keep independence in France, who want to create profitability before financial valuation, etc. There is a problem with economic sovereignty in France. That is, you were talking about start-ups, many start-ups beyond a certain stage raise funds in 3rd round, 4th round from American or English VCs, and so they are French gems but in reality they no longer belong. What I mean is, why? Because there are two schools and I criticize neither. In one, you have the Sodexo type, which grew into an empire with 400-500,000 people, etc., but the family only has 5%. So they have dual-class shares, they pilot everything but they opened their capital and grew through capital, etc. And I say bravo, it's great. You know that in the US, 80% of company financing is the stock market, development capital, venture capital, etc. In Europe, it's 20%, the rest is banks, 80%. So indeed, the stock market and all stock market activity is much less developed in Europe and that poses problems for large start-up financing where millions, tens of millions are needed. So people leave France unfortunately and go to the US to get funds. So I think we need to create a European fund, probably at European scale, to finance this economy of tomorrow in agritech, Frenchtech, AI, etc. I am totally in favor because, that said, I have a family business. And a family business as I imagine it, it's a company that advances at a mountaineer's pace in the mountain, we adapt and we don't need. Our philosophy is self-financing. So we went public 20-25 years ago. My uncle and father opened their capital to 25% on the stock exchange, and after 10-20 years, I arrived in 93, I played the game a bit and I said but it's crazy, it's useless to me, I don't do capital increases through the stock exchange. I give all my strategic information to all my competitors on earth, including the Germans who are secretive family companies that don't publish their accounts, who prefer to pay the fine, and so everyone knows everything about me and I know nothing about them. And then it costs you a lot. It was in French francs, it was around 300-500,000 francs for the roadshows, etc., then in euros it was very expensive too. And I said to myself, I'm wasting money, I do roadshows to give stuff and it's useless. So after the Lehman Brothers crisis, I left the stock exchange, so I tried, I did a public share buyback offer which didn't work. So I had three institutional shareholders who stayed saying 'No, no, we don't want to leave, we forbid you to leave the stock exchange because when they block, they were at 10% and to leave you need 5%.' Exactly. So they gave me a blocking minority and over time I managed to discuss and get them out. And today we are around 99% and we are very well because in fact you have freedom of management, you don't have to answer to anyone. Well, a little bit because there are laws, there is law, etc. We don't do just anything. Employees, stakeholders, but exactly. We don't give all our strategies to everyone, etc. So it works very well.
And who will take over after you?
