Political Braying Doesn't Sound Better In French

These days it comes as no surprise when politicians and labor leaders crowd the microphones to denounce a corporation that intends to move high-paying jobs overseas.

But in this case, the critics did not say a word about protecting American workers or about creating American jobs. It would have been odd if they had, because the audience was not a very pro-American crowd. The "sea" the jobs are moving over is the Atlantic Ocean, and their destination is Cambridge, Mass.

The protests were directed at the French pharmaceutical giant Sanofi, one of the world's biggest drugmakers. In the midst of a less-than-stellar but still profitable year, the company's Canadian-German CEO, Christopher Viehbacher, announced plans to shift many research and development functions from France to Massachusetts, home of Sanofi's newest acquisition, Genzyme. The move may end up costing around 2,500 French jobs, according to Jean-Francois Chavance, a representative of the French Democratic Confederation of Labor.

Viehbacher said that he hoped the move would help incorporate Genzyme's culture of innovation into Sanofi's research and development department. During an earnings call in July Viehbacher told reporters, "Out of our research in France, we haven't really developed a new molecule in 20 years." (1) Genzyme, which Sanofi acquired in a $20 billion hostile takeover, is a world leader in producing treatments for rare genetic diseases.

French Industry Minister Arnaud Montebourg was not pleased. In a speech in the National Assembly, the minister said he had told Viehbacher that France "already had enough trouble limiting hemorrhages at companies that are losing money," without accepting "that ultra-performing companies start destroying jobs." (2)

Of course, it is not the responsibility of successful companies to balance job losses at less successful firms. In fact, a big part of what makes a company successful is the ability and willingness to focus jobs where the work can be done the most effectively and at the lowest cost. To his credit, Viehbacher responded that Sanofi would "make no apologies for being a profitable company." (2)

After Viehbacher's refusal to reconsider his business strategy solely to please politicians, Montebourg and other French leaders may feel that all they can do is grumble. Grumbling is probably all that they will do, despite the worrisome implication in a Wall Street Journal article (2) that the French government could retaliate against Sanofi using the leverage of the national health-care insurance program.

There is another option that French government officials are overlooking: improve their country's business climate so successful businesses have more incentive to stay put.

Doing so would, first and foremost, mean giving up the unofficial policy of bashing companies for decisions that are good for business but bad for politicians. Second, it would mean relaxing regulations, in order to give businesses space to encourage the sort of innovation that Sanofi has been unable to foster in France, but that Genzyme was able to produce in the United States.

France currently ranks 29th, among 183 economies, for overall "ease of doing business," according to The World Bank's Doing Business Project. The U.S. remains ranked at number four despite its own set of issues, some of which I have written about before, including those that led the insurance giant Aon to move its headquarters to the seventh-ranked United Kingdom. Because labor costs are high in Western Europe, as well as in the United States, an attractive regulatory environment and an innovative culture are particularly important as means of drawing the sort of higher-paid jobs Sanofi is shifting to the U.S.

Rather than working to attract businesses, however, France is likely to continue its strategy of trying to coerce and scare the ones already based there into staying. This is the same rhetoric we have heard here in the States. Unlike many words, however, these don't sound any better in French.

Sources:

1) BloombergBusinessweek, "Sanofi's Shock Therapy Enrages the French"

2) The Wall Street Journal, "Sanofi to Go Ahead With Job Cuts"

For more articles, please visit the Palisades Hudson Financial Group LLC newsletter or subscribe to the blog.

Newsletter: http://palisadeshudson.com/sentinel/

Blog: http://palisadeshudson.com/current-commentary/

Adding Asset Value by Sound Property Management

Today's tough economic times requires owners of income producing real estate to focus on sound property management practices to ensure that their investment remains income producing. With the continuing tightening of business credit, to increasing costs of conducting business for the user of commercial real estate space, owners must insure that their investment is continuing to operate on a profitable basis month-to-month and returning the desired annual return for the owner.

It is critical that owners understand property management best practices to achieve financial and investment asset returns year after year. The best way to insure success is to implement a comprehensive property management program. Most owners hire experienced property management firms to manage all aspects of managing their assets if they do not have the experience nor the time and knowledge to do so. It is imperative to fully understand various legal, administrative, landlord-tenant relations/laws, building code and a host of other aspects of owning investment real estate for success, not to mention to keep the owner out of potential legal trouble.

This article is meant to provide a summary of some of the most important elements of a comprehensive property management program that not only provides benefits for ownership, but also benefits users (tenants) as well. The following represents some key elements of such a program:

1. Proper tenant screening: credit checks, review of financial statements, review bank accounts (past 60-90 days), names of current and previous suppliers for reference checks, business plan (if start-up), existing client/customer base.

2. Understand tenant's business structure: sole proprietor, LLC, S-corp, C-corp.

3. Fit their space requirement and line of business to your property: understand how tenant's business (industry, hours of operation, etc.) fits with you property type and current tenant mix if not standard office property, retail, etc., will the tenant request/require expansion space in the near future, for high profile tenants, what kind of tenant build-out will be required and cost.

4. Operating costs: what, if any, property operating costs can be passed through to tenants, energy efficiency/rebate programs from local utility companies, monitoring energy usage, property tax assessments, proper insurance.

5. Lease negotiations: an experienced management firm is invaluable here with the many issues and requirements that make-up a well drafted and comprehensive agreement.

6. Routine vs. emergency maintenance issues: preventative maintenance program, contractor relationships, in-house personnel.

7. Marketing/Leasing: market knowledge, broker, user contacts, advertising/promotion programs.

8. Tenant retention: existing tenant/property management reporting system, lease renewal program, property enhancement program.

9. Landlord-tenant requirements: compliance with federal, state and local laws.

10. Fire/life safety and building codes: compliance with national, state and local laws and ordinances.

The foregoing represents some important considerations for managing any investment property. A properly implemented and maintained property management program is a critical component for ownership success for any type of investment real estate. Especially in these tough economic times, it is smart to full appreciate how a professionally managed property can add value to your investment as well as add value to you tenants and will go along way toward tenant retention, which under any circumstance will result in profitable real estate returns.

Scott has a multi-disciplined real estate background covering over 19 years' of experience in commercial real estate and management field with extensive experience in acquisitions, leasing, options, easements, contract negotiations, due diligence, feasibility, and zoning requirements. Scott's background involves managing property investment portfolios, conducting market studies, site and zoning analysis, financial analysis and researching land-use and zoning requirements to gain jurisdictional approvals, and Planning and Zoning Board relations.