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From 1836 to the present day, all the stages that have led Schneider fom the Masters of Steel Foundries at Le Creusot to Schneider Electric the leader in automation and electricity management. Schneider Electric, 170 years of history Merlin Gerin Square D Telemecanique Schneider Electric Building a New Electric World 170 years of history In its 170 years of existence, Schneider Electric has successfully met many challenges by making important strategic choices. The Company's growth path over the last few years has led it to expand in electricity by acquiring firms with complementary competencies in this area. With three international brands Merlin Gerin, Square D and Telemecanique, Schneider Electric is today one of the world's leading manufacturers of equipment for electrical distribution, industrial control and automation. The information in this section is taken from "Schneider, l'Histoire en Force", by Tristan de la Broise and Felix Torres. Published in 1996, this 492-page book contains many illustrations, including archival photos and paintings. It may be ordered, in French only, from Editions de Monza 40, rue Marboeuf 75008 Paris - France Phone: +33 (0)1 42 25 71 74. The price is 50 euros, including tax. For more information, visit the "Academie Frangois Bourdon" portal, http://www.afbourdon.com > For more information, click on the underlined green links in the text. 1900: Bastille station, Paris metro 2 The Schneider Electric key dates 1870-1918 - Moving into the world market International ambitions A t the turn of the century, Eugene II made investments in many countries, in mining, electricity and steel. Most of the Company's exports stemmed from its success in weapons manufacturing. On the eve of World War I, Schneider had risen to the challenge set in 1870 to build cannons as effective as Krupp's. The training and preparatory school circa 1910 > For more information, click on the underlined green links in the text. King Ferdinand of Bulgaria visiting Le Creusot in 1905 Technical breakthroughs and buoyant businesses Eugene's son Henri Schneider learned from the events of 1870 and recognized the obvious superiority of steel for military use. New processes introduced in the 1860s and 70s yielded a stronger steel at a lower cost. Schneider innovated in iron and steel production and quickly became one of Europe's leading manufacturers of weapons and infrastructure. Labor relations, Schneider style At the end of the century, the Schneiders became increasingly concerned with meeting their workers' needs in the areas of education and general welfare. However, the cozy world of "Schneiderville" was unable to eliminate all labor disputes, as was seen in the long strike of 1899. 100 metric ton steam swage hammer 4 The Schneider Electric key dates 1918-1944 - Time of uncertainty The heady post-war years After playing a major role in France's victory in 1918, Schneider had to reconvert to a peacetime economy. It was during this period that the Company took advantage of the expansion of electricity, steel and cement in everyday life. Three firms that are now Schneider master brands were also founded during these years: Merlin Gerin, Telemecanique and Square D. Breakthrough in Germany and eastern Europe After World War I, Schneider began setting up operations in Germany and eastern Europe. Its partnership with Skoda was one of the highlights of this strategy. Reichprotektor Von Neurath visiting the Skoda plants in Pilzen 1923 Skoda (Plzen) stock certificate The dark years Ten years later, Germany's renewed power seriously threatened Schneider's subsidiaries in eastern Europe, and very close ties were broken as a result. At the same time, the recession of the 1930s and arrival of France's Front Populaire government took a heavy toll on the Company. From 1940 to 1944, the German occupation put Schneider in a very difficult position, and its watchword was "endure but resist". > For more information, click on the underlined green links in the text. 1922 Train carrying a 25,000 kWturbine and auxiliary equipment in Buenos Aires 5 The Schneider Electric key dates 1944-1960 - A new world The Schneider logo in the 1950s Reconstruction and rebirth Once France was liberated, Schneider had to again deal with reconversion, but this time, the country needed to be rebuilt. The Company's new Chief Executive, Charles Schneider, gradually abandoned weapons manufacturing to focus on civilian needs. In-depth restructuring was conducted in 1949 to prepare Schneider for the modern world. "Leading the national economy" Charles Schneider wanted the Company to "expand, modernize and rationalize". He applied this slogan to all the business segments, from construction and steel to electricity and nuclear power, as well as to Schneider's strategy of acquisitions and exports. Charles' policy met with great success, and in 1959, General de Gaulle declared that Schneider was "leading the national economy". Forging at the Creusot plant Gathering clouds Unfortunately, these remarkable strengths masked a number of weaknesses that would later have serious consequences: low return on equity, fragile earnings hampered by heavy investments, and the decline of heavy manufacturing. In addition, the executive team was stingy about investing in research, feared innovation, and refused to question its own management methods. > For more information, click on the underlined green links in the text. Le Creusot circa 1950 6 The Schneider Electric key dates > For more information, click on the underlined green links in the text. 1960-1981 - The crumbling empire Baron Empain oversaw the existing business but did not develop it, and he lacked the necessary strategic vision for the Company to face the future with confidence. Pouring cast iron at the Montchanin foundry in 1971 Takeover Charles Schneider's sudden death in August 1960 raised the thorny problem of succession. During this period, the Company was paralyzed by the decline of key business sectors such as steel manufacturing and shipbuilding. The Empain family gained control of the group in 1969, raising hopes of a turnaround. Sluggishness and disappointment Empain-Schneider's diversifications hindered any kind of well-planned development. The crisis in the steel industry worsened the Company's already fragile situation, despite Spie Batignolles' good performance in construction and civil engineering. These setbacks, and, in particular, problems at Creusot-Loire, weakened the group without compromising its expansion; Merlin Gerin gradually joined forces with Empain-Schneider, and Jeumont-Schneider offered promising prospects. Modicon, which became part of Schneider in 1996, was established in the United States in 1968. CM4 locomotive assembly workshop circa 1970 The Empain years But Baron Edouard-Jean Empain, leader of the new Empain-Schneider group, managed the business as if it were an investment portfolio, with a heavy focus on short-term profitability. The traditional segments moved deeper into recession and the Baron's diversifications did not produce the expected results. 7 The Schneider Electric key dates > For more information, click on the underlined green links in the text. 2000-2005 - Building a New Electric World (cont'd) Other acquisitions or technical/technological partnerships expanded the Group's horizons. These included Ilevo in Sweden (infrastructure for high-speed data transmission using Power Line Carrier (PLC) technology), Hyde Park Electronics Inc. in the United States (ultrasonic sensing), and Leviton Manufacturing, also in the United States (electrical and electronic wiring systems for Voice-Data-Image (VDI) infrastructure). The Company reorganized the General Management team to execute its efficiency plans more quickly. Jean-Pascal Tricoire was appointed Chief Operating Officer to speed growth, enhance coordination and make the operating divisions more balanced while increasing the number of non-French managers. In 2004, the Company pursued its strategy of targeted expansion by acquiring California-based Kavlico a major player in sensing technologies, from Solectron, and Andover Controls Corporation, a US firm specialized in building automation and security solutions. The merger of TAC and Andover Controls, combined with the acquisition of Abacus Engineered Systems in the US have made Schneider Electric the leader in building management and security and energy performance management. The Company expanded its presence in sensors and actuators for repetitive machines with the acquisition of Dinel in France. Lastly, Schneider Electric sold its 40% interest in VA Technologie AG. To start 2005, Schneider Electric launched a new corporate program entitled new2. Designed to drive change, new2 builds on the accomplishments of NEW2004. It confirms the Company's commitments and intends to move Schneider Electric from Good to Great in the next four years by focusing on growth, efficiency and people. 10 The Merlin Gerin key dates Paul-Louis Merlin, main founder of Merlin Gerin 1920-1950 Merlin Gerin was established in 1920 and quickly developed competencies in the main areas of electrical distribution. It focused on high voltage equipment and on perfecting the first circuit breakers while building a solid network of sales agencies. The company also took an early interest in social issues and training. In the 1980s, the former regional firm grew into an international group with leading-edge expertise in controlling electric power. 1920 - Paul-Louis Merlin and Gaston Gerin formed Merlin Gerin to manufacture electrical equipment. The company initially had 38 employees. 1921 - Introduction of the first range of high voltage oil circuit breakers. 1920-1935 - The company opened 16 agencies in France and appointed marketing representatives in Algeria, Tunisia, Belgium, the UK, Italy, Vietnam, Morocco, Spain, Portugal, the Netherlands, Romania and the Soviet Union. 1923-1929 - Creation of Societe Amicale de Secours Mutuel (providing health, maternity and death benefits), a pension fund and an apprentice program. 1934 - Agreements with Materiel Electrique S.W. (Schneider Westinghouse). 1937 - Development of the pneumatically operated circuit breaker. I tcxiM- uftaiif yciinca D I VJO MC TF L H Merlin * Gi Ki\ Advertisement from 1923 designed by Andry-Farcy Merlin Gerin low voltage circuit breaker, 1920 End of shift, 1925 11 The Merlin Gerin key dates 1950-1975 Paul Merlin, CEO of Merlin Gerin from 1965-1975 50s - Distributor network formed and first foreign subsidiaries established. Development of the low voltage business and introduction of the first Compact circuit breakers. 1954 - Agreements with Telemecanique to rationalize production. 1960 - The percentage of sales to private-sector companies rose to 60% from 2% in 1950 and the workforce increased to 8,000 employees. In low voltage, introduction of the DA circuit breaker range and development of power electronics (rectifiers and UPS systems), as well as control/monitoring systems and automation devices for the nuclear industry. Equipment for the "France" ocean liner. 1967 - In high voltage, first 245,000 volt Hexabloc metal clad substation. Development of hexafluoride (SF6) technology. 1970 - Program to promote employee share ownership three years before mandated by French law. 1974 - In low voltage, introduction of the modular Multi 9 range. 1975 - Schneider gradually acquired interests in Merlin Gerin. 1955 - Paul-Louis and Paul Merlin testing a product outside laboratory Merlin Gerin demonstration van 12 The Square D key dates 1940-1970 1948 - Square D had 7,000 employees and ten plants in North America, as well as 43 regional offices. It produced half of the circuit breakers used in aviation. 1950 - Creation of the first pension plan for employees in the eastern plants. 1951 - Introduction of the first "plug-in" type circuit breaker distribution panelboard. 1955 - Beginning of organized growth with 72 sales offices, new production units, several hundred distributors and operations in Europe (London, and then Germany, France and Italy). Introduction of QO circuit breakers and a range of solid state relays. 1956 - Square D Foundation organized to manage and distribute charitable contributions previously made directly by the company. 1957 - New plants opened in Lexington and Atlanta to manufacture load dispatching centers and safety switches. 1964 - Square D had 10,000 employees and 22 plants. 1966-1967 - Introduction of I-Line panelboards, Type S motor starters and Visi Trip circuit breakers. Square D 30A 250V circuit breaker Promotion for I-Line prefabricated busbar trunking at a trade show, circa 1967 15 The Telemecanique key dates 1930-1960 1952: the DRT-8 contactorcircuit breaker in a waterproof enclosure 1931 - All employees granted fifteen days of vacation. 1935 - Telemecanique opened a high-power test center in Nanterre for research on contactor breaking power. Development of thermo-magnetic relays and introduction of the DRT-12. 1937 - Sales-linked incentive scheme eliminated and profit-linked incentive scheme extended to all employees. First corporate newsletter. 1946 - Consultative works council established and job grade scale considered. Monthly salary implemented for all employees. 1951 - Creation of a network of exclusive distributors in France. 1954 - Agreements with Merlin Gerin to rationalize production. 1956 - Development of high frequency contactors. One of the first brochures for Telemecanique industrial control products 1949: the Company acquired the Rueil-Gare plant to produce medium and large switchgear 18 Appendix The Schneider Electric key dates > Click on the symbol to come back to the previous context | Henri Schneider (1873-1898) Henri Schneider, born in 1840, pursued the same management strategy as his father. He was a serious, hard-working leader who lifted his family into the top circles of French society. Henri also inherited his father's political connections; he became regent of the Bank of France, Vice-President of the Comite des Forges, Director of the Paris-Orleans railways, Mayor of Le Creusot and Town Councilor and Deputy of Autun. Henri was not easy to peg-he liked both high society and the provincial life in Le Creusot. He devoted himself to labor issues and made the company town of Le Creusot a model of enlightened paternalism. Henri died in Paris in 1898, leaving a sturdy empire consolidated through 23 years of conservative yet energetic management for his son Eugene II. | New processes Schneider continued to make innovation its main priority. The Company perfected the swage hammer system in 1878 and took its first steps into the nascent electricity market in 1891. Several brilliant engineers set the standard for product quality and leading-edge technology. Among them were Honore Balzon, who developed no-weld and hammered steel parts; Floris Osmond, who worked on the cellular structure of steel; and Jean Werth, who invented nickel steel for armor plating. Other engineers, such as Charles Valrand for the Thomas-Gilchrist process, allowed the Company to adapt inventions patented by competitors. Jean Barba conducted crucial material research during the emergence of low carbon steel, which eventually replaced puddled steel in weapons manufacturing (it was less expensive, easier to work and resisted traction better). Important advances were also made in steel manufacturing and heavy industry with Bessemer converters, open-hearth furnaces and the acquisition of the Thomas-Gilchrist process in 1879. | Weapons In 1871, President Thiers ordered Eugene Schneider to build the "cannons of revenge". As a result of this strategic decision, the Company became one of Europe's largest arms manufacturers in the pre-World War I period. Schneider's engineers invented new alloys, new armor plating and more sophisticated weapons systems than those built by their rivals in Germany or England. Artillery equipment and armor plating were Schneider's flagship defense products, and the Company leveraged all of its patents and skills to offer customers comprehensive technical systems. While the French armed forces were a major customer, exports quickly exceeded domestic sales. Schneider supplied armor-plating for battleships in Italy, Denmark and the United States and sold its celebrated 75 cannon (which was greatly superior to the German 77) to Mexico, Uruguay, Persia, China, Bolivia and Peru. At the turn of the century, Schneider had representatives in all the main European countries, Scandinavia and Latin America. | Infrastructure Schneider continued to dominate the infrastructure segment, with the reconstruction of bridges destroyed in 1870 and new architectural feats. The Company worked on the two domes of the Observatory in Bordeaux, the Morand bridge in Lyon and numerous other bridges in Corsica, Reunion, Senegal, Tonkin, Romania, Argentina and Chile. At the 1878 World's Fair in Paris, Schneider showcased its technology in the breath-taking Machine Gallery, which weighed 40,000 metric tons and covered 39,000 square meters. There were fewer jobs for railway station structures, which had been a booming business under the Second Empire. The railway stations in Caballito, Argentina (1887-1888), Nancy, France (1890) and Santiago, Chile (1895-1897) were the last ones to be built with Schneider structures. 22 Appendix The Schneider Electric key dates | Meeting workers' needs For Schneider, 1867-1914 was the golden age of social economics. Aside from providing financial assistance for construction and housing, the Company took on the mission of meeting its workers' needs from the cradle to the grave. To start, it established special Schneider schools in which the students' level of advancement determined what sort of job they would have in the Company later on (workers, clerical staff, engineers, etc.). A home economics school was also created for girls to teach them how to become good homemakers. Aside from education, Schneider was involved in general welfare institutions such as the hospital, the pension fund, the retirement home, an orphans' home and a co-op. All these organizations created strong ties between Schneider and its employees. > Click on the symbol to come back to the previous context | The long strike of 1899 The labor movement began taking shape at the end of the 19th century, with the first May 1 celebration in 1890 and the formation of the CGT labor union in 1895. The Schneider empire was rocked by labor unrest, and a general strike broke out on May 29, 1899. When a milling operator named Charleux urged his co-workers to form a union, he collected 6,000 signatures. The situation was resolved at the beginning of October through the mediation of Waldeck-Rousseau. Eugene II was to uphold his promises, but Schneider had the legal right to establish a "counter-union" by creating a system of elected worker representatives (36 years before the Front Populaire government initiated the idea). The final throes of the strike in 1900 resulted in victory for Eugene II; Charleux was banished along with the main strike leaders. | Eugene II (1898-1942) Born in 1868, Eugene II was brought up by his father to honor and cherish Le Creusot. At the age of 20, he got to know the family business inside and out. He also studied heavy artillery in Germany and directed the workshops in Harfleur. A dynamic, methodical and hard-working man, Eugene II combined stability and an entrepreneurial spirit. He was less interested in politics than his predecessors, and served only briefly as a Deputy. Instead, Eugene devoted his energy to leading the Company through the crises and wars of the first half of the 20th century. Nevertheless, faced with unprecedented upheavals, he was unable to ward off the Company's eventual decline. | Investments in many countries Schneider had exported for years worldwide, both in construction (bridges and railways) and weapons. At the end of the 19th century, Eugene II began taking interests in promising markets such as China (1895), or in countries identified as potential major customers (e.g., Russia, in 1897). This period of international expansion lasted until 1914, with a wide variety of target countries and businesses: iron mines in Spain (1898), electric power in Switzerland (1898), steel works in Italy (1899), a port in Argentina (1902), and projects in Morocco and Algeria (1903), Chile (1904) and Bohemia (1904). From 1910 on, the Company stepped up its partnerships in the defense industry with such allies as Italy, Russia and Belgium. However, the financial results were mixed, with losses exceeding profits. In addition, World War I focused Schneider's energy on Europe and kept the Company from taking advantage of contracts farther afield. 23 Appendix The Schneider Electric key dates | Major role in France's victory Schneider was one of the French army's main suppliers during World War I. Like many other manufacturers, the Company accelerated its output to support the war effort. At the armistice, certain German companies based in France were confiscated and transferred to Schneider. A number of these firms survived the recession of the 1930s and World War II to become major Schneider assets in the 1950s. In 1918, Schneider made a strategic shift from global expansion, which did not produce the desired results, to a more European focus based on strong partnerships with manufacturers in central Europe. More than ever, the Company needed to find new businesses to fill the void left by defense in the post-war period. | Electricity Schneider became involved in electricity at the end of the 19th century. The Champagne-sur-Seine plant, which was dedicated to this new business, had 1,200 employees in 1914. The facility specialized in such equipment as transformers, generators and traction motors. By 1919, the unit was big enough to handle construction of the Chancy-Pougny dam and power plant on the Rhone river. This was Schneider and Cie's first hydroelectric project. In the 1920s, the plant manufactured electric motors, switchgear for power plants and electric locomotives. However, it was no longer large enough to compete effectively and patents became a pressing problem. As a result, Schneider decided to join forces with Westinghouse Electric International & Co. during a phase of consolidation in the French electrical equipment market. > Click on the symbol to come back to the previous context | Operations in Germany and eastern Europe In 1920, Schneider took advantage of French supremacy in central Europe following the collapse of the Austro-Hungarian empire. Aside from acquiring German sites, the Company established close ties in Czechoslovakia, with Skoda, and in Poland, Hungary, Austria and Yugoslavia. Schneider was supported in its eastward drive by Union Europeenne Industrielle et Financiere (UEIF), the bank in charge of monitoring industrial and banking interests acquired in the former Austro-Hungarian empire after 1919. French investments were both industrial and financial, thanks to the intervention of a network of banks in Austria, Yugoslavia and Hungary. This expansion fit in with a largescale international strategy, as the target companies were used by France's friends (Romania, Czechoslovakia and Yugoslavia) to push back Germany and its allies. | Recession of the 1930s The 1930s marked the end of Schneider's shining prosperity The effects of the economic recession were aggravated by the rising power of the Nazis in Germany. In 1938, Schneider was forced to withdraw from all its interests in eastern Europe, including Skoda and other companies in Czechoslovakia. It withdrew from its interests in Poland in 1940. In 1937, the sudden wave of nationalization in France seriously handicapped Schneider. As Eugene II put it, this decision "cut Schneider off from a considerable part of its mechanical tools and most of its engineering, research and development resources". The Company, which had always based its future on innovation, was suddenly paralyzed in this vital area. It took much effort to get the business back on track, and the outbreak of World War II made this task all the more difficult. 24 Appendix The Schneider Electric key dates > Click on the symbol to come back to the previous context | Endure but resist After the French defeat in 1940, Le Creusot was in the zone occupied by Germany. Despite pressure from the Germans, Eugene II decided to slow down production and devote as much capacity as possible to civilian orders in France. The occupying forces conducted numerous inspections and limited civilian production to a minimum. Little by little, the Resistance movement took hold in Schneider's plants, and many employees were deported for their convictions. Schneider paid dearly for its past as a weapons manufacturer. The Allied forces bombed the Creusot plants twice so that they would be useless to the Germans. A third bombing mission that would have wiped Le Creusot off the map was avoided thanks to Jean and Charles Schneider's contacts with the Resistance. Even so, the Germans destroyed most of the installations when they retreated in September 1944 | Charles Schneider (1942-1960) Charles Schneider, Eugene Il's third son, was born in 1898. He succeeded his father in 1942. His elder brother, Henri-Paul, was killed in an air battle in 1918 and his other brother, Jean, preferred a career in aviation. Charles took on the difficult challenge of putting Schneider back on its feet. He invested, modernized and reorganized the Company. Although deeply dedicated and a hard worker, Charles did not know how to delegate responsibility or prepare for the future. He was a throwback to the age of forge masters-a man guided by duty and discipline rather than by strategic vision. | "Expand, modernize and rationalize" Schneider entered the 1950s as a powerful and complex enterprise made up of companies involved in a wide variety of businesses. Charles Schneider decided to organize these companies in a rational manner by creating major divisions that reported to a family-owned holding company with a limited staff. Three main divisions were established: Compagnie Industrielle de Travaux (CITRA), Societe des forges et ateliers du Creusot (SFAC, which became Creusot-Loire in 1970), and Societe Miniere Droitaumont-Bruville. For many observers, the 1949 reorganization plan was incomplete, as it created a family of companies rather than a modern enterprise. Charles was committed to developing Schneider's activities, identifying new outlets and winning new markets. He withdrew from weapons manufacturing when the defense industry was nationalized and focused on civilian activities that were to become flagship businesses (notably electricity and nuclear power). |Weaknesses Charles Schneider was aware of the group's weaknesses, especially the low return on the considerable investment made to modernize production resources. In addition, several of the companies remained extremely sensitive to economic conditions. Schneider began to feel the negative impact of the 1937 nationalization program; it no longer had the base for innovation that had always underpinned its success. Profits were weak, and the key business segments began a downward spiral into decline. Compounding these problems, the family's desire to maintain ownership control limited the Company's financial resources. Lastly, Schneider's leadership team lacked the vision and audacity of the Company's founders. The empire was living on its past, bolstered by its momentary strength and unable to adapt to a changing world. 25 Appendix The Schneider Electric key dates | Decline of key business sectors In the 1960s, the steel industry seemed to spin uncontrollably into decline. Lacking sufficient financing, the Creusot site had to reduce its modernization investments and it gradually fell into debt. Exports, notably to eastern Europe, kept production running as the workforce was gradually reduced. Construction also ran into trouble, and base costs had a serious impact on the Company's profitability. Lastly, the shipbuilding business was severely hit by recession when the government refused its support, as was the case in Dunkirk. Schneider responded to the decline of its key businesses with limited financial and leadership resources. The former "leader of the national economy" no longer commanded a forefront position in the world of industry. | The Empain family (1879-1981) > Click on the symbol to come back to the previous context Edouard Empain (1880-1929) Edouard Empain (1852-1929), a French-speaking Belgian, established his first company in 1880 to meet the growing need for mass transit in industrialized cities. He quickly expanded into other countries and developed the company's skills in electricity. Jean Empain (1929-1946) Jean Empain, born in 1902, took over the business with his brother Louis on the death of their father, Edouard. Together, they created a holding company called Electrorail. Jean was not a conquering visionary like his father, but he ensured the company's future by rationalizing and reorganizing the diverse units into a consistent enterprise. Edouard Empain (1946-1967) When Jean passed away, his son Edouard-Jean was too young to take over the business. As a result, the management committee appointed Edouard Empain chairman. Electrorail lost its overseas activities after decolonization and refocused on France. The group's motor at that time was SPIE, a company specialized in the construction of electric power plants, railway equipment, power transmission equipment and public works. Edouard-Jean Empain (1967-1980) Edouard-Jean, born in 1937, spent ten years learning the ropes before taking charge of the group in 1967. He wrested management control of Schneider in 1969, but he did not have a well-planned industrial strategy on which to base his decisions. In 1981, he was asked to turn over the chairmanship of Empain-Schneider to the new CEO, Didier Pineau-Valencienne. | Diversifications In the early 1970s, Empain-Schneider was deeply mired in heavy industry, even though the dominance of these activities in the business portfolio had been questioned at the end of the 1960s. Taking the advice of consultant Pierre Sadoc, Baron Empain launched a series of diversifications between 1975 and 1978 that failed to produce conclusive results. The group acquired Dynamic skis, Fusalp winter clothing, Jazz watches and the Centrale des Particuliers want ads. It also launched VSD magazine and opened a fashion company with Ted Lapidus. There was no overarching vision or comprehensive strategy to these diversifications, and each company had to map out its future alone. 26 Appendix The Schneider Electric key dates | Crisis in the steel industry The steel and heavy manufacturing arm formed in 1966 by Schneider and Marine-Firminy was on its last legs in the mid-1970s. Hopes were raised by an exceptionally high profitability ratio, but were dashed by the effects of the oil crisis. While other steel groups turned to the government for help (and were melded into Usinor and Sacilor), EmpainSchneider did not receive any support. A veiled conflict simmered between Empain-Schneider, which felt it had been unfairly abandoned, and the government, which considered that the group's overall situation did not merit public aid. In 1980, a new downturn in the world steel market raised serious questions about Creusot-Loire's future. Despite a rationalization plan implemented by Philippe Boulin, the sole chief executive after 1978, the company was structurally in the red and could not be saved. > Click on the symbol to come back to the previous context | Spie-Batignolles Established in 1902 by Empain, Societe Parisienne pour l'Industrie des chemins de fer et des tramways Electriques (SPIE) enjoyed great success in the industrial piping market after 1945. Spie merged with SCB in 1968 to attain international status. Following the combination of Empain and Schneider, Spie Batignolles took over CITRA. The new company's activities were organized into three divisions: Electromechanical Equipment, Building and Construction. The oil crisis contracted the domestic market but created tremendous opportunities in oil-producing countries. This prosperity ended as the 1980s drew to a close. The company gradually developed its electrical activities and achieved very good results. In 1989, sales totaled FF 24 billion, of which a third from outside France. Electrical equipment accounted for 48%, building and development 22%, construction 13% and industrial engineering 12%. In 1997, Schneider completed its refocusing by divesting its remaining interest in Spie Batignolles. An employee shareholder group acquired 58% of the company and UKbased AMEC acquired 42%. | Jeumont-Schneider At the beginning of the 1960s, Materiel Electrique S-W was a medium-sized company with low profitability and limited resources. An Empain company, Forges et ateliers de construction electriques de Jeumont (FACEJ) was in much the same position. The two firms merged in 1963 to form Jeumont-Schneider. This move was positive from an industrial point of view, but produced mixed results at the financial level. In the 1970s, the company expanded considerably after a few failed alliances with CGE-Alsthom and Merlin Gerin. Its finances deteriorated suddenly in 1984, when four of the seven divisions went deep in the red. The businesses in question were involved in heavy equipment, which was responsible for much of the group's image equity and prestigious technical reputation. The company tried to enter the telephone business, but was overshadowed by Matra, which was favored by the French government. Jeumont-Schneider sold its telephone activities to Bosch in 1988 as part of a general restructuring plan. In 1993, Schneider divested Jeumont-Schneider, which made boiler pumps and electrical rotating machines, to refocus on electricity. 27 Appendix The Schneider Electric key dates > Click on the symbol to come back to the previous context | Didier Pineau-Valencienne (1981-1998) Didier Pineau-Valencienne, known by his initials as DPV, was born in 1931. A graduate of France's prestigious HEC business school, he took charge of a small Empain bank called BPI in 1958. A few years later, he turned around Carbonisation et charbons actifs (CECA), a joint subsidiary of Empain and Rhone-Poulenc. In 1974, CECA was sold and DPV joined Rhone-Poulenc. After handling budget control and strategic planning, he was appointed to head the Polymers and Petrochemicals divisions. In 1979, he joined the Rhone-Poulenc executive committee. In late 1980, he came to Schneider to transform the Company from a sprawling conglomerate into an efficient and consistent enterprise. The mission was a success, and by 1988 the businesses were refocused on electrical distribution, industrial control and automation. In January 1999, DPV handed the Company over to Henri Lachmann and became Honorary Chairman, after 18 years of work to re-build a company with a clear strategy. "We have achieved our goal of making Schneider what it is today." | Streamlining the Company Didier Pineau-Valencienne's first objective when he arrived in 1980 was to give the Company a consistent profile by withdrawing from non-core activities and loss-making businesses. The two major crises in the early 1980s involved CreusotLoire (1984) and the shipbuilding business (1986). In spite of these conflicts, the new management team held steady and set about refocusing Schneider on the futureoriented businesses of electricity. The Company streamlined further in the mid-1980s and concentrated on restoring its balance sheet before launching any new major projects. | New shareholders Schneider reached a crossroads in 1984. After withdrawing from its historical businesses of steel and shipbuilding, the Company had to choose a new direction. One option was to liquidate the group and reorganize the viable businesses in a new enterprise. Another was to continue pruning, and to rebuild an international group out of Jeumont-Schneider, Merlin Gerin and Spie-Batignolles. Management chose the second solution and successfully identified a number of new shareholders. These included Paribas, nationalized in 1981; Axa, led by Claude Bebear; Bruxelles-Lambert France, which later became Parfinance; and AGF. In 1986, these four core shareholders owned 60% of SPEP, the group's holding company. By the end of 1999, their interest had been reduced to 8.2%. At that time, the public held 82.8% of the capital, treasury stock accounted for 4.8% and Schneider employees owned 4.3%. | Growth through acquisition In 1998, after several years of streamlining and uncertainty, Schneider was finally ready to face the future with confidence and redeploy. The Company quickly implemented an expansion strategy to achieve critical size and compete with the major electrical equipment manufacturers. During this period of growth, Schneider increased its interest in Merlin-Gerin (1987) and made two spectacular acquisitions: Telemecanique (1988) and Square D (1991). These moves made Schneider a world leader in electrical distribution, industrial control and automation (in this last area, the Company integrated Modicon in 1997). 28 Appendix The Schneider Electric key dates | Worldclass manufacturer The merger of Merlin Gerin, Telemecanique, Square D and Modicon, which are now Schneider brands, created a tight network of subsidiaries in 130 countries. This precious heritage is the foundation of a worldclass organization that can meet specific customer needs anywhere on Earth. Today, it is continuing to expand in the global marketplace, as year after year new subsidiaries and production plants are created close to customers around the world. Schneider's assertive global vision has led it to pursue vigorous growth in the search for critical mass. "There were 300 global market segments ten years ago and there are 1,500 today," noted Didier Pineau-Valenciennes in 1995. "By 2000, there will be 6,000 or 7,000. What is more, five companies in the world will control 80% of the market." | Stepping up the pace of growth In today's rapidly changing business environment, a company like Schneider has to be very flexible in markets that have become both global and extremely competitive. In 1996, the Schneider 2000 corporate mission program was launched to get everyone involved in this critical process. The objective was to achieve competitive growth and double the Company's performance in three years, by encouraging the use of project teams, shortening decision-making chains, sharing experience and empowering employees. In 1999, the program was relaunched as Schneider 2000+, whose objectives are to speed growth and enable the Company to be more global, more responsive and more profitable. The initial targets had already been exceeded by end-2000. | Acquisitions A sustained acquisitions drive has enhanced Schneider's leadership by broadening the product lineup in fast growing regions. The development of new products is being quickened by strategic alliances, such as Schneider Toshiba Inverter in speed drives, MGE UPS in UPS systems, VA Tech in the high voltage business and Thomson multimedia in power line carrier technology. To strengthen its final low voltage distribution operations, Schneider Electric acquired Scandinavia's Lexel in 1999 and is preparing to combine with Legrand, the world market leader, in a friendly merger in 2001. In 1998 and 1999, the Company also acquired Schyller in Italy (industrial plugs), Mafelec in France and Veris Industries, Electrical Switchgear and Power Distribution Services in the United States. In 2000, fourteen companies were acquired, adding an aggregate 500 million to sales: Low voltage: Metesan Lexel Elektrik in Turkey, Prodax in Hungary, Crompton Greaves and S&S Power Switchgear in India, May & Steffens in Germany, Conlog in South Africa, Infra + in France and EFI Electronics in the United States. Medium voltage: Bardin in France and Nu-Lec in Australia, with power grid reliability solutions. Industrial control and automation: Steeplechase Software and Quantronix in the United States, Crouzet Automatismes (a subsidiary of Thomson CSF) in France, and Positec in Switzerland, which strengthened the product lineup for machinery manufacturers. > Click on the symbol to come back to the previous context 29 Appendix The Schneider Electric key dates > Click on the symbol to come back to the previous context | Developing an e-culture In 2000, an e-business division was created to accelerate the Company's integration of Internet technologies. Schneider Electric is a member of Voltimum, Europe's first electrical installation portal, and of the World Wide Web Consortium (W3C), an international association for the deployment of Web applications, services and standards in industry. | Innovating As in the earliest days of the Company, expansion is being driven by innovation. Each year, more than 5% of sales is devoted to research and development, which employs 2,500 people in 20 countries. R&D is sharply focused on market demand, in line with Schneider's commitment to offering truly innovative solutions to customers in industry, infrastructure, buildings and energy. These solutions are designed to enhance ease of use, electrical equipment performance, flexibility and safety. This innovation dynamic enables the Company to renew 20% of its product lineup every year. | The NEW2004 company program Schneider Electric is committed to creating value for its four core stakeholders: customers, shareholders, employees and the community. The NEW2004 program is based on six challenges: > Be more Customer-Centric > Be committed to Quality > Be more Global > Increase our People's commitment > Think Innovation > Develop corporate Community responsibility. | The automation and electricity management Schneider Electric is committed to leading a strategy of differentiation by strengthening those things that make it the world's unique Power & Control specialist. > Unique in terms of market access, > Unique in terms of products, > Unique in terms of services, > Unique in terms of brands with global and local brands: Merlin Gerin, Square D,Telemecanique geared to continuously improving the quality of our products and processes while optimizing costs and efficiency. | New product lines strengthen Schneider Electric offering Electrical Distribution In 2002, the Compact C and Masterpact low voltage circuit breaker ranges were renewed, enabling the delivery of endto-end low-voltage distribution solutions including products, switchboards and services. Satia, our new range of more compact transformer substations, provides enhanced protection for transformers. Automation Six new product ranges were introduced for industrial control and automation in 2002. These intelligent networked products can be seamlessly integrated into open and collaborative architectures. 30 Appendix The Schneider Electric key dates | A sustained strategy of alliances, acquisitions and partnerships in 2002 Japan, South Korea, USA, Europe At year-end 2002, Schneider Electric acquired the Japanese company Digital Electronics, the world's leading manufacturer in Human Machine Interface systems. The company holds leading market positions in Japan, South Korea, the United States and Europe. The acquisition provided Schneider Electric with a key entry point in a new high-growth segment. Reinforced position in China and Malaysia In August 2002, Schneider Electric acquired all outstanding shares in Schneider Swire Ltd., which manufactures and markets low voltage distribution equipment in Hong Kong and mainland China. Denmark and Russia At year-end 2002, Schneider Electric acquired two motion control specialists, Hano Elektroteknik A/S and Digimatic Aps. The companies now serve as the technical support center for automation/motion applications for Denmark, focusing on services for OEMs. In February 2002, a 90% interest was acquired in Uralelektro Contactor, which manufactures and sells contactors and motor starters. The company has a strong distribution network in Russia. Partnership in Gulf countries To strengthen our presence on large projects, a partnership has been formed with Danway, a wholly-owned subsidiary of Emirates Holdings, a key player in electrical engineering in the Gulf with strong positions in the water, energy, oil and gas markets. The objective is local manufacture of low and medium voltage equipment to deliver solutions with more local content, enabling greater flexibility and responsiveness. | new2: our new company program The ambition of new2 is to move Schneider Electric from good to great. Schneider Electric is leveraging its strengths and positioning itself as a leader in innovative solutions. The three operational priorities are growth, efficiency and people. > In the area of efficiency, Schneider Electric will continue to deploy methods and resources such as Six Sigma, Lean Manufacturing and Quality & Value Analysis. It will also transform its business processes and IT system. This will involve building a global core system with an outside partner. Lastly, the Company will re-balance its resources and costs in relation to euroland sales. > In the area of growth, Schneider Electric will shorten time to market, develop new, less cyclical activities with high growth potential (Building Automation and Security, Secured Power, Services and Ultra Terminal) and pursue geographic expansion in fast-growth regions. The Company will also pursue its strategy of targeted acquisitions in high potential areas that offer a good strategic fit with its core businesses. > As for people, Schneider Electric will take even greater steps to ensure health and safety, develop talent and unleash entrepreneurship. Together, these action plans will allow Schneider Electric to be a great partner for customers, a great company to work for, a great investment and a great corporate citizen. > Click on the symbol to come back to the previous context 31 Building a New Electric World Schneider Electric SA Headquarters 43-45, boulevard Franklin-Roosevelt F-92500 Rueil-Malmaison Cedex (France) Tel. : +33 (0) 1 41 29 70 00 Fax : +33 (0) 1 41 29 71 00 www.schneider-electric.com March 2005