Eurotunnel’s 20th anniversary marks a personal triumph for Jacques Gounon, the quietly spoken headmaster’s son from Créteil in south-east Paris. Writes Andy Milne
The civil engineer took over as head of a beleaguered Eurotunnel in 2005 and spent two years wrestling with the organisation’s rapidly unravelling finances. By 2007 disaster loomed as Eurotunnel‘s battered officiers recommended suing for bankruptcy protection, Procédure de Sauvegarde as it is known in France. In a final bid to rescue the tunnel Gounon and his immediate team flew to New York to negotiate with the company’s main creditors.
Treaty of Canterbury
On the surface the problem historically for Eurotunnel was that it cost twice as much to build as at first thought and that revenue projections were, by contrast, wildly over-inflated. The deeper problem was the Treaty of Canterbury, which set up the legal framework for the tunnel. British premier Margaret Thatcher had been deeply suspicious of the scheme from the start: A railway tunnel? Connecting Britain with France? Public money? Forget it.
Under the terms of the treaty the tunnel was to be built and operated without a penny of tax payer cash. The Iron Lady, dame de fer, the French called her, had no wish to become known as the dame des chemins de fer. A charmed François Mitterrand agreed. The treaty was actually signed in Canterbury Cathedralon12th February1986.
Eight years later under a light rain in Coquelles on 6th May 1994 President Mitterrand and Queen Elizabeth II cut a ribbon officially opening the tunnel. From day one it made a loss. Eurotunnel never had a financial safety net the way the railways do because of the terms of the Treaty of Canterbury.
Fast forward nine years and Eurotunnel was facing disaster. Few people speeding through the tunnel this May realise how close the whole enterprise came to closure. Gounon and his team took on a vociferous crew of creditors; all of them aggrieved that the tunnel had failed to produce the revenues and profits they had been lead to expect. After a series of shareholder revolts and boardroom coups Gounon was able to instil calm and confidence and win a measure of support for his re-structuring proposals – at least in France and Britain. However the real challenge was the banks and hedge funds. The eventual fate of the Channel Tunnel was not decided in Paris or London but in New York’s Rockefeller Plaza.
After two days of intense negotiations with various financiers and creditors Gounon concluded his proposals were being sideswiped. The plan called for a reduction in Eurotunnel’s unmanageable debt from £6.2bn to £2.8bn in a debt- for-equity deal. This would enable the company to trade successfully and eventually turn a profit. Predictably the bankers wanted their money back and said no. Gounon appeared unmoved.What the bankers perhaps missed was Gounon’s political background. Most of them thought he was just a civil engineer in a smart suit. True up to a point; encouraged by his parents, Max and Odette, Gounon had studied at the prestigious Ecole Polytechnique in Paris where he read civil engineering.No teaching career for young Jacques – although he later married a schoolteacher. Gounon worked his way up dividing his time between the private and public sector. He ran waste management services for the city of Paris, plant and equipment for the Loire local government; the heavy lifting of the state sector. Between 1986 and 1990 he headed up the Comatec group before joining construction giant, Eiffage.
This is one very imaginative, clever, guy
Then in 1993 he worked for the French government advising on industrial affairs. In 1995 he became chief of staff for transport minister Anne-Marie Idrac in the new Alain Juppé administration. That winter France was plunged into a series of damaging strikes as Juppé strived to get public spending under control. Gounon was involved in tough negotiations with France’s powerful transport unions. ‘I’ve never seen him lose control,’ says Idrac, who went on to reform the SNCF. ‘This is one very imaginative, clever, guy.’ Negotiations proceeded night and day. Gounon never flagged, surprising his boss and the convenors with his physical stamina and genial self control.
In New York Gounon looked at his watch and realised he could make the 6.30 Paris flight if he left for Kennedy Airport within the next few minutes. Polite and immaculate as ever Gounon stood up. Cheerful at the prospect of getting home and seeing his wife and three children and with his usual cordiality he announced that he was leaving. What happened next has passed into legend.
The debt was restructured as planned and in 2011 Eurotunnel started making a profit. Loadings are up and business is brisk. Already revenues have risen by 8% this year as the economy picks up. The Eurotunnel boss remains self effacing. ‘The success has been the result of teamwork, no single person could have saved the company,’ Gounon told reporters in Calais on 6th May 2014 Certainly Jacques Gounon enjoys unprecedented levels of shareholder support – much of it comes from the 660,000 small shareholders, most of them French members of the public who see him as one of them. ‘My only regret is that the restructuring was not done earlier by my predecessors. But by 2007 we had a deadline to meet to solve our problems and we would have gone bust if we had not restructured.’
Gounon’s 11th hour brinkmanship paid off. Perhaps early tips learned back in Créteil on how to control a roomful of unruly children paid off. More apposite were his experiences negotiating with trade unionists.
Despite the shouting and outrage that day in New York, the money men swarmed round Jacques Gounon as he waited for the elevator. With a politeness often unremarked in New Yorkers they persuaded him back into the room. Legend has it they were ready to sign. Five minutes later Jacques Gounon had his deal and the Channel Tunnel was saved.