The Dailymotion lesson: national champions soon become world losers

So Yahoo bought Tumblr for the hefty price of EUR795 million. This past week, Yahoo announced that it will start broadcasting live rock concerts, following its recent decision to start producing TV series à la Netflix and Amazon. Nowadays, Tumblr is the thirty-fifth most visited website in the world, according to Alexa.

That is the joke of the ‘national champions’ mindset embraced by European governments. ‘National champions’ soon become ‘world losers’. Although the real losers are, in this order, the shareholders, the taxpayers and, finally, the workers of these firms. Crédit Lyonnais is a case in point: in the Nineties, the French taxpayer threw into that bank more than one billion dollars (more than 1.8 billion of today’s dollars, or EUR1.3 billion), just to see the then-largest financial institution of France slowly sink until it was bought by Crédit Agricole in 2003.

There is an even more flagrant example—Alstom. Ten years ago, it was bailed out by the French taxpayer at a cost of EUR2.5 billion. The bailout was aimed at fending off Alstom from German group Siemens. Ten years later, America’s General Electric and Germany’s Siemens (again!) are bidding for the power unit of Alstom, and, one more time, the last word is in the hands of the French government.

Having big names in the Global Fortune 500 list is great for prestige, but awful for the bottom line. By sheltering companies from global capitalism, European governments deprive companies, first of all, of capital, and then, of know-how. This modern protectionism also limits the creation of new firms, since the old behemoths maintain their grip over whole industries. Further, a company can be bought by a foreign competitor and nothing happen. In spite of all the hysteria, Germany’s Mannesmann fell into the hands of Vodafone in 2000, and it did not mean the end of the world for Germany. Germany’s Daimler bought Chrysler in 1998, only to sell it to Cerberus in 2007 (actually, Daimler paid Cerberus to take over Chrysler, so the Americans sold the same firm to the Germans twice). In 2009, Italy’s Fiat took control of Chrysler, and now it dreams of moving its headquarters from Italy to the US. Finally, Arcelor has not changed since Mittal purchased it in 2006.

So, selling a company to a foreign competitor is not a bad thing. It is a pity that the Europeans have not still noticed. The Dailymotion lesson should apply to the Alstom partial sale.