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"Dear Employees": CEO Hints at Belt-Tightening as He Negotiates New Deal with French State

Monday 21 October 2013

All the versions of this article: [English] [français]

Version imprimable (fr)

CEO Emmanuel Hoog has given more details on how he sees the current talks on a new contract between AFP and the French government, due to run from the start of next year through 2018. His main conclusions are dramatic to say the least. M. Hoog writes that:

  • "a vital proportion of our client portfolio (the written press) is in dramatic decline. Any hope for better days seems illusory."
  • "the State is under a two-fold constraint – Brussels and the public finance crisis – and can no longer live up to the role it had in the 1970s or 80s."
  • "Our business does not generate enough cash flow."

This has strong overtones of the melodramatic conclusions drawn by M. Hoog’s predecessor, Pierre Louette, who in 2009 planned to "make AFP one of the world’s news leaders for the digital age" [Fr] - by radically changing the company’s statutes and turning it into a joint-stock company owned by the state.

Unlike M. Louette, Emmanuel Hoog has to at least pay lip service to a solemn promise made by no less a person than the French president. While campaigning for office in 2012, François Hollande committed himself to "preserving AFP’s independence". The soon-to-expire Aims and Means Contract with the government (Contrat d’objectifs et de moyens, or COM, 2009-13) posited major growth in AFP’s trading revenues, but M. Hoog now believes that such hopes were based on "an unrealistic business trajectory".
"It will be difficult to find new, strongly growing income," he states soberly.

Whence M. Hoog’s decision to pen his touching missive to AFP staff in all six of the agency’s working languages, addressing us as "Dear Employees".
Anyone attuned to such management guff will immediately understand that he or she is being told of changes that are going to downsize a certain number of rewards and benefits, and involve a need to either work more or for less, if not both.
This in a situation where pay for staff working under French labour contracts is already being frozen for a second year, as management is refusing to apply even the modest wage hikes conceded by the French national press barons.

M. Hoog tells staff he wants " a major company agreement ", something that we see as indeed being necessary if it is truly aimed at ensuring that everyone working for AFP around the world can enjoying the same basic labour and democratic rights - an outcome that SUD has long demanded.
Unfortunately the CEO is above all concerned, as he says, to achieve "greater mastery of our payroll charges ".

As of November 7, management will therefore open formal talks with SUD and the five other trade unions which gained legal representation status in the elections held just over two years ago.
As stated in M. Hoog’s letter to staff, the talks will cover working hours, wages, career plans and organisational issues. They will aim to achieve a new in-house collective bargaining agreement to complement the national agreements that cover many aspects of HQ-status employment at AFP.

M. Hoog’s Slanted View of AFP’s Situation

The most recent annual report on AFP’s accounts and labour practices produced by the Sextant consultancy for the Works Committee, was submitted to the Committee on October 17. It confirms what we have said on several occasions, most recently in our leaflet dated September 30, i.e.:

"Despite both the economic crisis and a competitive news environment, AFP’s current financial difficulties do not result from a spectacular collapse of the agency’s commercial income. These problems stem mainly from a withdrawal of support for the agency on the part of the French state and a series of decisions made by successive management teams.
In particular, the government reneged on a promise to provide direct aid worth some 20 million euros to fund the development of the new "Iris" editorial system. The government’s decision to turn what should have been a grant into a long-term loan, at a high rate of interest, is a major cause of AFP’s current indebtedness. Another source of problems has been management’s insistence on pushing through an outsized restructuring project at the Paris headquarters.
"

As regards the need to modernise and enrich AFP’s commercial offerings, we do not deny that action is necessary. However the CEO’s claims that sales to traditional clients, notably print newspapers are on a catastrophic and ineluctable downward path simply do not stand up to scrutiny.

According to the Sextant report, AFP’s commercial income - excluding income from the contract with the state - grew by 0.4% in 2012. Far from collapsing, sales to print clients held up well given the underlying crisis in the media industry. The general text service in French indeed saw its turnover decline - but by a mere 0.65%, to 52.5 million euros. The only text service to suffer an appreciable fall in its sales over the year was that in English, which saw a decline of just over three percent to 17.9 million euros.

This points to another faulty plank in Emmanuel Hoog’s analysis of AFP’s problems: his repeated assertions that the share of French clients in the agency’s overall sales is declining.
Far from it: in fact, the Sextant Report shows that France’s share in worldwide sales remains stable: standing at 45.5% in 2012, against 45.4% in 2011.

For SUD, what AFP needs above all is to refocus its efforts on its core activities for all types of media including print, striving for serious and comprehensive news coverage that is as objective as possible. The company should be wary of the siren calls [Fr] of "new products" and of types of content that do not fall within the public interest mission laid down in its statutes.

Overall conclusion:
as long as the French state maintains the current levels of its annual aid, AFP’s business model is financially viable.

The model only needs to be fundamentally changed if one believes that the resources needed for investment absolutely have to come out of commercial income, on the assumption that such funds will no longer be provided by the state, and that no other sources can be found that will comply with European Union rules. We do not believe that.

On the issue of investment capital, this is what La Correspondance de la Presse, a subscription-only media newsletter, wrote on October 18 after interviewing Emmanuel Hoog (our translation):

"In financial terms, AFP ideally needs to achieve a return on sales of between 20 and 25 million euros as against 12 million euros in 2012. According to M. Hoog, however, that would not be enough to build up resources of some 60 million euros to prefund investment over the coming period, as he put it."

To put it in less convoluted terms: however much AFP staff work their fingers to the bone, they will never work hard enough to give the company the investment resources it needs. And as management clearly doesn’t believe that external sources of funds can be found to pay for future developments, they intend to ask staff to tighten their belts even more to make up the shortfall.

AFP’s Supposedly Obsolete Statutes: A Familiar Drumbeat

All this seems to be building up to yet another attack on the fundamentals of the agency’s suis generis business model, aimed at sapping both its founding statutes and the pay, benefits and working hours of its HQ status staff. Consider the following recent developments:

  • September 18 - In a report on France’s system of subsidies for the French press [Fr], the National Audit Court looked into the subscription rates paid by government agencies and other public bodies for AFP’s services. The question is not without interest, as current negotiations with the EU Commission in Brussels are making a clear distinction between funds provided to ensure the agency’s public interest mission and purely commercial monies paid for subscriptions. However the Audit Court, which has become notorious for going beyond its mandate as a simple financial oversight body, went on to state baldly that AFP’s statutes were "strongly out of line" with free market principles and moreover "less and less well fitted to its development plans, which are nowadays more international than purely domestic."
  • October 4 - In defining the mission of French MP Michel Françaix, who is to study AFP’s situation in the coming months, Prime Minister Jean-Marc Ayrault wrote [our translation]: "it appears necessary to assess the adequacy of the legislative, regulatory and financial conditions in which AFP carries out its missions". Maybe. But he went on to link the mission explicitly to "the aim of cutting public deficits", which does not exactly sound promising.
  • October 14 - Inside the agency, the Society of Journalists, a non-union grouping which has always taken management’s side whenever the latter has wanted to push through unpopular measures, entered the fray. In a statement shot through with gut anti-trade-unionism, the "SDJ" effectively prepared the ground for the CEO’s coming offensive by announcing before him, and more explicitly than him, that "The first interest of a general works agreement in a business — and this is no secret — is cost control." (Apparently whoever wrote their text had little familiarity with French collective bargaining agreements). The SDJ went on to claim, rather bizarrely in our view, that AFP’s journalists "cannot be asked to swallow any concessions or sacrifices unless they are fully convinced of the need".

For his part, the CEO had never previously acknowledged - at least in public - that what he was seeking was a levelling down of our pay, benefits and working conditions as part of a basic renegotiation of AFP’s operating methods. Which is why the statement he was quoted as making to the "Correspondance de la Presse" on October 18th was so significant. The newsletter wrote:

  • "In general terms, "there has to be movement concerning AFP", M. Hoog believes, "because its basic model hasn’t changed in 50 years", in a world in which technology, law and tax arrangements have all changed. At the end of the day, the launching of a complaint procedure in Brussels had at least one positive consequence: "raising a whole range of issues which constitute obstacles", he said." [our translation]

There’s Nothing Wrong with Defending our Turf

For anyone who’s been following industrial relations at France’s main public media companies over the past year, the new offensive aimed at AFP’s staff and statutes comes as no surprise. Politically-motivated cost-cutting and the reworking of collective bargaining agreements have already swept through the public television group as well as Radio France and the National Audiovisual Institute (INA).

Indeed, the industrial relations policies of the current government are broadly in line with those of its predecessors, including offensives against basic benefits and public services in a bid to roll back gains made over generations. The most striking example being the ongoing reform of retirement benefits on the principle of "more years in work = lower pensions".

This is perfectly in line with the principles defended by the unelected European Commission when it seeks to marketise all media and information services on the supposed basis of "free and undistorted competition". (The very principles which were soundly rejected by the French electorate in a referendum in 2005, but then rammed through regardless by Nicolas Sarkozy two years later).

There is nothing irreversible or unstoppable in the current process. During the upcoming union-management talks on Emmanuel Hoog’s "major company agreement" for AFP, SUD will not be among those who simply want to cave in, but neither will be seeking to defend the status quo. Instead, we will explain that is perfectly possible to modernise AFP without throwing the baby out with the bathwater. And we will also keep staff informed at each stage of the talks.

Help us defend AFP and our shared interests. Don’t let them divide us.

Storm clouds are building: it’s time to unite and above all to unionise - by joining SUD!

Paris, October 21, 2013

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