I fear that the new bond between the Prime Minister and Prince Charles may be closer than we thought. The renaming of the Department of National Heritage as the Department for Culture, Media & Sport has all the hallmarks of the less than incisive thinking of the Prince of Wales.
Culture is on the political agenda, and it is the sort of vague word the Prince and the Government like. But I have to say that I think they have put it in the wrong department. I would suggest a Department of Culture, Trade & Industry (there is, after all, a Royal Society of Arts, Manufactures & Commerce, so the Prince should approve).
I suggest this because two corporate events of the past week would seem to suggest that culture in big business – particularly the differences in cultures of big business – is a rather greater priority for the nation than whether ethnic clog-dancing groups are receiving enough Lottery money.
These events are Bernard Arnault’s intervention in the Guinness/Grand Metropolitan merger and the transatlantic tussle to try to arrange a marriage between BT and its US partner, MCI. Both, I think, are deals that potentially founder on an essential misunderstanding of foreign commercial cultures.
Arnault, chairman of French luxury goods group LVMH, is opposing plans by Guinness and GrandMet to form GMG Brands. LVMH owns 14.2 per cent of Guinness and 6.4 per cent of GrandMet, so they have to listen. Arnault proposes a four-way demerger of GMG assets and combination of the three existing groups’ wines and spirits operations, including his company’s Moet Hennessy drinks subsidiary, into an 18.8bn group quoted in London and Paris.
Guinness and GrandMet spent most of last week rubbishing these plans. They said that Arnault’s demand for 35 per cent of the resulting drinks conglomerate is “insanely greedy”. Of course it’s greedy – he’s French. His proposals are also dismissed as hopelessly complicated. Of course they’re complicated – he’s French.
Before Blair’s and Prince Charles’s new Department of Mutual Understanding & Niceness, or whatever it might be called, cries that I am being racist, let me say that it has always been a central tenet, as far as I understand it, of the anti-racist movement that it is important that ethnic cultures are protected and respected. The fine point I am seeking to make is that Arnault has not come up with a greedy and complicated proposal because he is French – he has come up with a French proposal that GrandMet and Guinness find greedy and complicated (because it is French). These are cultural matters.
Arnault, I might add, has a fiduciary duty to stir up as much trouble as possible on this deal. He has shareholders to account for and they are going to want to milk this deal for all it’s worth. Many of the shrewder ones will have invested in LVMH precisely because of its stake in Guinness, knowing that the brewer sooner or later had to pull an earnings-growth rabbit out of a hat. As they swirl their balons in Paris in celebration, we may consider them greedy, complicated or incorrigible. Or we may consider them, more simply, Gallic.
As for BT, I have long considered that it was a tragedy that it was forced by narrow-minded Anglo-Saxon regulation to seek its future growth with a US partner, rather than with a British one. I am convinced that a combined BT and Cable & Wireless would have been a world beater.
There are a variety of reasons why that didn’t happen, but the curious system of regulation that the last Government devised, whereby privatised companies were given private-sector competitive pressures, while still enduring quasi-public sector regulation, clearly played its part.
BT’s management, led by Sir Iain Vallance, could be accused of bull-headedness in rushing into a deal with the Americans, but one can understand that they must have been fired up by the restrictions on growth in their home market. In any case, it is part of the British culture to go abroad – it used to be to the colonies – to achieve things that couldn’t be done at home.
As suggested at the time, MCI is operating in a mature market (also heavily regulated) and it was all too evident BT might be buying a pup. MCI revealed a fortnight ago that its losses in the US will total some $800m (500m) this year and could reach $1bn (620m) next year. When the deal was originally struck, losses this year were projected to be of the order of $400m (250m) and MCI was expected to break even in the US local market. BT is consequently flailing about trying to renegotiate the deal.
Was MCI taking a punt? Of course it was – it’s American. It’s why the US, the crucible of capitalism, has risk capital where we have venture capital. It’s why US investors in British utilities made so little fuss over the the windfall tax – they consider the unpredictable to be in the nature of a punt.
These are cultural differences that have not been addressed as we talk confidently of a global business village. I would like to see some international business culture courses and exchanges – it’s of considerably greater value to the nation than the Department for Culture, Media & Sport.