France sets its sights on companies in Israel

PARIS – France’s culture and cuisine have long made it the most popular tourist destination on the planet, but French authorities face a more difficult task when it comes to attracting non-European companies and investors.

Faced with stagnant growth and near-record unemployment of 10.6 percent, the government of the world’s fifth-largest economy is introducing new measures that it hopes will improve its reputation and entice foreign firms – including Israeli ones – to establish operations there.

Around 100 Israeli companies operate in France, employing more than 2,400 locals, according to Serge Boscher, managing director of the Invest in France Agency, which is responsible for “job-creating investment.” These companies cover agriculture, plastics, transport, logistics and other industries, and are seen as just the tip of the potential iceberg.

“The challenge for us is to attract Israeli start-ups,” Boscher says, referring to hi-tech pioneers in biotech and clean-tech. “Israeli companies are very innovative, and we need this high level of innovation.”

Moody’s recent announcement that it was stripping France of its AAA credit rating seemed to underpin international sentiment over the country’s economic performance.

The agency said a number of factors influenced the decision, including France’s sustained loss of competitiveness and the rigidness of its labor, goods and service markets.

Boscher is confident that the international market will ignore Moody’s decision. However, he points out that it provides an incentive for France to push ahead with reforms, including the “competitiveness pact” announced earlier this month.

The Socialist government of President Francois Hollande promised 20 billion euros in tax credits to companies over a three-year period, beginning in 2013.

Its announcement came one day after a government-commissioned report by Louis Gallois, former chief of Airbus parent company EADS, recommended that tax breaks be implemented over one or two years for immediate effect. Gallois warned that high labor costs were reducing the profit margins of businesses, leaving them little to invest in product innovation.

The second key element to improving France’s combativeness, according to Boscher, is a successful conclusion to the “Social Conference” – negotiations between unions and business leaders that the government hopes will usher in a new era of compromise.

France, long famed for labor strikes that paralyze entire industries, is looking to neighboring Germany’s “social dialogue” for inspiration.

An anemic auto industry

France’s all-important auto industry has been hard hit by Europe’s economic crisis, as shown by Peugeot Citroen’s decision earlier this year to layoff 10% of its domestic workforce of 80,000 employees.

Officials at Renault, France’s other famous car-maker, say their company has managed to soften the blow from falling European demand through its 13-year old cross-continental alliance with Nissan (joined recently by a third partner, Germany’s Daimler Group).

Renault holds a 43.4% stake in Nissan, while its Japanese counterpart holds a 15% stake in Renault, ensuring that both partners have a mutual self-interest – and more importantly, enabling them to manufacture almost one-tenth of their vehicles in their partner’s plants.

“For the European auto sector, the biggest problem is overcapacity,” Renault Nissan Alliance communications director Rachel Konrad explains.

“Depending who you talk to, there is 20-30% more production than purchases. The way the laws are set, you have to continue paying workers, so it’s incredibly inefficient if they’re not producing anything. The fact that our Normandy plant cannot only produce Renault’s engines, but also Nissan’s and Daimler’s, is beneficial and increases job security. No other company can do this.”

The alliance also helps boost sales, according to Jacques Verdonck, Alliance Director in charge of coordination with Daimler.

“What we have achieved is to be less dependent on the European market,” Verdonck says, pointing out that more than 50% of Renault vehicles are sold outside the continent – including Russia, where the alliance has 32.9% market share, and Brazil, where is has 7.7% market share.

On the production side, Renault has been a pioneer in Zero Emission vehicles. Its Fluence ZE electric cars hit Israeli and Danish roads this year, thanks to a partnership with Israel’s Better Place – which operates dozens of battery-replacement stations for the vehicles in both countries.

Renault officials declined to comment on the performance of their partner – which removed founder Shai Agassi as CEO in October and has lost around $500 million since its establishment in 2007. However, they point out that electric vehicles are an earlystage technology, which means they are reliant on customer feedback and on differences in regulations between countries.

“We have gotten more than 50,000 electric vehicles on the road [in total]. I don’t think anybody, internally, thought it would be easy,” Konrad says.

“I have been working in electric vehicles since 2008, and if you read the media four years ago, they said, ‘everybody will switch to electric vehicles.’ Internally, people were saying, “no, this is a gradual shift, a significant, important segment for our industry and for our planet, but it’s not going to be immediate.’”

ITER: Fostering fusion

France is literally miles ahead of its neighbors in at least one form of transportation: long-distance trains.

The TGV high-speed rail service completes the 750-kilometer journey between Paris and Marseille in just over three hours. It departs the capital’s Gare du Nord station, moves southeast through the green pastures of Burgundy and the foothills of the Alps, arriving at Marseille’s Saint Charles Station.

From there it is a short metro ride to the city’s ancient Mediterranean port.

The port area is changing dramatically thanks to Euroméditerranée, Europe’s biggest urban renewal project. Backed by funding from the European Union and ANIMA Investment Network – a group of government development agencies in the Mediterranean basin – some 500,000 sqm. is already built or under construction, with expectations this will double by 2020.

Marseille will be thrust into the spotlight when the city assumes the revolving title of European Capital of Culture in 2013. But it is 60km. away, in Cadarache, that the region’s most ambitious project is being conducted – at the International Thermonuclear Experimental Reactor (ITER).

Funded and run by seven members – the EU, US, China, Japan, South Korea, India and Russia – ITER is the largest experiment ever conducted to demonstrate the scientific and technological feasibility of fusion energy. Construction on the Tokamak reactor began in August 2010, with completion expected this decade.

Once operational, the reactor will produce electricity via several steps: it will heat deuterium and tritium plasma to more than 100 million °C; keep hot plasma away from walls by strong magnetic fields; use high energy helium nuclei to sustain burning plasma; neutrons will transfer their energy to what is known as a “blanket”; and finally, in a fusion power plant, a conventional steam generator, turbine and alternator will transform the heat into electricity.

This will not be the first time nuclear fusion is used to produce electricity; JET, located in Britain, achieved its first plasma in 1983.

But if everything goes to plan, ITER will generate 500 megawatts of energy for just 50 megawatts invested – and that will be a first, explains spokesman Robert Arnoux.

“ITER will not produce electricity; it will just demonstrate that we can do it. It will demonstrate that we can do it for a rather long duration, and it will demonstrate that we can amplify the action,” he says.

Proponents of nuclear fusion point out that it produces no CO2 or other greenhouse gases, leaves no long-lasting radioactive waste, and provides an almost limitless supply of fuel that can be widely distributed around the globe.

Additionally, Arnoux points out, it cannot be used in the proliferation of weapons – as it lacks the heavy elements that go into an atomic or hydrogen bomb.

“This explains why the US and the Soviet Union cooperated on nuclear fusion in the late 1950s, during the hottest period of the Cold War,” he says. “Everyone has realized that there were no military implications, because there was no proliferation issue.”

Right now, all that can be seen of the reactor are its foundations – one level of several hundred seismic pads, enclosed by thick retaining walls, which will isolate the reactor from ground motion in the event of an earthquake. Most of the reactor’s components are being constructed abroad, by the member states.

The largest and heaviest loads will arrive at the harbor of Fos-sur- Mer, and transported along a specially created 104km.-long route to Cadarache.

When completed, the Tokamak will weigh 23,000 tons, and reach a height of 73 meters – slightly taller than the Arc de Triomphe.

If all of this sounds like a distant, almost utopian vision – it is, admits Arnoux. He estimates that an industrial prototype is achievable by the year 2050, but that there is no certainty it will prove commercially viable.

“We know that it will work, but the problem is whether it will work very well, or just average,” he says.

“Our industrial blueprint is crazy; no industry builds a machine this way, but this is inherent to the project.

“This project is not only about science and technology; it is about teaching the world how to build this fabulous machine.”

The writer visited France as a guest of the Invest in France Agency.