Groupe Bull's 450m euro (£275m) loan from the French Government may be in jeopardy after the European Commission decided on Tuesday to launch a formal investigation into it.
Bull, along with ICL, which has also had its share of problems, was for many years one of the doyens of European IT services. But last month the company had to go, for the second time in less than six months, cap in hand to the French government for the funds it needs to survive.
At the time, chief executive Pierre Bonelli said this was the last time the company would get any money from the state -- even though European Commission rules stipulate that companies can only receive state subsidies for restructuring once, and Bull received 1.3bn euros in restructuring aid from the French government in 1994. Since the 1960s, the French government has given Bull more than 7bn euros.
To get the latest tranche through, the French government will have to convince the Commission that the aid will be used to keep the company afloat and not to pay for job cuts and other restructuring costs.
"This is definitely a rescue loan," said Bull spokeswoman Marie-Claude Bessis, "Without this aid Bull should have been in a very bad situation." Bessis said the loan would be used to carry Bull through to the end of June this year.
The French government is keen to keep Bull afloat, as it owns 16.3 percent of the company, and many of Bull's 11,000 employees are French. Chief executive Pierre Bonelli was drafted in from IT services group Sema in December 2001 to help the ailing firm amid widening losses. In the 12 months to December 31, 2001, Bull's net losses widened from 242.8m euros in 2000 to 253m euros in 2001 on sales of 2.54bn euros, 9 percent down on the previous year.
Bull now plans to break even in the second half of 2002, said Bessis, partly through job cuts of up to 1,500. But, she stressed, the loan would not be used for the job cuts. "We will do this with other means, not with the money from the government," she said, "Staff cuts will be financed by selling assets." In 2001 Bull sold its CP8 smart card business to Schlumberger Ltd for 295m euros, and a large part of its Integris service arm to French services group Steria SA.
Bessis added that she did not believe the EC would break the deal. "They will make a deep investigation, which is normal, but it is really business as usual.