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Aug 13, 2023

Can France's CMA CGM Make Marseille the Shipping Capital of the Mediterranean?

MARSEILLE, France—The tower dominates the skyline. Overlooking the Mediterranean

MARSEILLE, France—The tower dominates the skyline. Overlooking the Mediterranean Sea, hulking over the Port of Marseille, and rising above a mass of clay-tiled roofs and blocks of drab housing projects, the sleek glass skyscraper is a beacon of wealth and prestige, standing out from the rest of this working-class city.

A container ship operated by the French shipping company CMA CGM is moored in the Port of Marseille on June 29, 2018. BORIS HORVAT/AFP via Getty Images

MARSEILLE, France—The tower dominates the skyline. Overlooking the Mediterranean Sea, hulking over the Port of Marseille, and rising above a mass of clay-tiled roofs and blocks of drab housing projects, the sleek glass skyscraper is a beacon of wealth and prestige, standing out from the rest of this working-class city.

This is the headquarters of CMA CGM, the world's third-largest container shipping company—and inside, times have never been so good. Although it's still little-known outside France, the privately held, family-owned firm now rakes in nearly as much annual revenue as HP, Boeing, or Morgan Stanley. The Marseille-based giant earned a staggering $17.9 billion in profit in 2021, with 2022 on pace to be another record year, even as the wider industry cools down. These once unthinkable gains have padded the pockets of the company's French Lebanese chairman and CEO, Rodolphe Saadé, transforming his family into the fifth wealthiest in France as it sits atop one of the country's few corporate giants to be headquartered outside the Paris region.

In an industry that has caused headaches for consumers, drawn renewed scrutiny from regulators, and remains somewhat clouded in mystery, the Saadés are the indisputable winners. And they aren't content to merely sit on top of their gains. Rodolphe Saadé has dug into the fresh earnings to grow the family business—expanding the firm's logistics empire, extending its influence, and bolstering its ties with a French government increasingly aware of the strategic benefits of having a major global shipping firm based on domestic shores. At a time of renewed global crises and heightened instability, CMA CGM offers the promise of reliable shipping to France and its sprawling collection of overseas territories—topped off by a certain willingness to make investments that align with French state interests.

The shipping sector may be cyclical, but the power and influence of the Saadés are almost certainly here to stay.

Rodolphe Saadé, the chairman and CEO of CMA CGM, attends the inauguration of the container ship Antoine de Saint Exupery in Le Havre, northwestern France, on Sept. 6, 2018. CHARLY TRIBALLEAU/AFP via Getty Images

When U.S. President Joe Biden rails against "foreign-owned" shipping carriers for hurting U.S. consumers, CMA CGM is precisely the kind of company his administration has in mind. Amid surging demand and sprawling traffic jams at U.S. ports, global freight costs skyrocketed in 2021 and 2022, with average container costs peaking at around eight times their pre-crisis levels. The steep hike in prices translated into hefty profits for the handful of largely European firms that dominate the industry alongside CMA CGM: the Italian Swiss Mediterranean Shipping Co. (MSC), the Danish giant Maersk, and the German firm Hapag-Lloyd, followed by COSCO and Evergreen, which are based in China and Taiwan, respectively. Together, these six firms account for around 70 percent of the international market share.

None of them are based in the United States: Declining public investment in shipbuilding and the deregulation of the maritime transport market in the 1980s and 1990s made it easier for these foreign companies to dominate routes to and from U.S. shores. (Florida-based Sealand belongs to Maersk, while American President Lines, despite its name and eagle logo, is a subsidiary of CMA CGM.)

The recent profit wave "wasn't expected at all," said Pierre Cariou, a shipping expert at Kedge Business School in Bordeaux, France. "From 2008 onward, profits were very limited, and whatever their different strategies were, no company was making a lot more than the others. Then, all of a sudden, we moved into a conjuncture in which they all started making spectacular profits."

As the COVID-19 pandemic threw a wrench into global supply chains, people in the world's wealthiest countries altered their spending habits—nowhere more so than in the United States, where consumers shelled out for imported goods such as electronics and exercise equipment. The surge in demand and a scarcity in the number of containers available led to bottlenecks at ports and soaring freight costs.

In a market dominated by just a few players, those spectacular profits have also fueled accusations of price gouging—and particularly in the United States, where Congress voted to strengthen the authority of the federal agency regulating maritime shipping. The shippers have denied those allegations.

The CMA CGM Marco Polo container vessel passes under the Verrazzano-Narrows Bridge in New York on May 20, 2021. TIMOTHY A. CLARY/AFP via Getty Images

The jump in revenue has ushered in a dizzying increase in wealth for the owners of the carriers, most of which are privately held. Within a single year, the net worth of the Saadé family, which through a holding company owns 73 percent of CMA CGM, skyrocketed from 6 billion euros in 2021 to 36 billion in 2022, according to the French business magazine Challenges, which publishes annual wealth rankings. Only LVMH chairman and CEO Bernard Arnault and the families behind Chanel, Hermès, and L’Oréal are worth more in France.

Yet the firm's ownership structure also means that CMA CGM has faced less pressure to pay out the sorts of lavish dividends and buybacks craved by shareholders of publicly traded firms. To be sure, CMA CGM's owners paid themselves a handsome $3 billion in dividends last year, most of that sum going to the Saadés. But as the soft-spoken 52-year-old Rodolphe Saadé has himself stressed in response to questions over windfall profits, the shipping carrier has invested the majority of its earnings back into the company, allowing it to double down on an expansion strategy that it had already started before the pandemic. In addition to beefing up its container shipping business, it's pivoting more generally into logistics.

The list of recent acquisitions is long. After buying the Swiss giant Ceva Logistics in 2019, CMA CGM acquired the U.S. logistics firm Ingram Micro CLS in late 2021. Around the same time, it bought an entire terminal at the Port of Los Angeles, the busiest port in the United States. Last year, CMA CGM acquired a French parcel delivery service, a separate French shipping company, and a massive stake in Air France-KLM, becoming the company's fourth-largest shareholder and inking a deal to operate cargo planes. In December 2022, CMA CGM announced an agreement to acquire two container terminals at the Port of New York and New Jersey, the busiest port on the East Coast. According to Bloomberg, the deal could be worth some $3 billion.

The goal is, in part, to insulate the carrier against a dip in freight costs, which is precisely what has happened in recent months as global growth waned. "The idea is, when there's a downturn, if things become difficult again, you’ll have properties to sell," Cariou said.

But the acquisitions are also aimed at constructing a more durable empire in the long run.

"Saadé's thinking is, ‘Let's not just be an actor in maritime transport,’" said Cyrille Coutansais, research director at the Center for Strategic Studies of the Navy (CESM), part of the French defense ministry. "The goal is to slowly position themselves as a logistics operator, to be across the value chain, upstream and downstream, and to control almost the entire logistics chain."

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The headquarters of CMA CGM in Marseille on Sept. 27, 2022. NICOLAS TUCAT/AFP via Getty Images

A couple of terms come up over and over again when discussing the Saadés with people who’ve spent time with them: The family values "privacy" and favors "discretion." Apparently, that includes their interactions with the press. For this story, spokespeople from CMA CGM declined Foreign Policy's request to interview Rodolphe Saadé or to make any company officials available on the record. They declined multiple requests to speak on the record themselves. Reached on her personal cellphone, Tanya Saadé Zeenny, Rodolphe's sister, who sits on the board of directors and chairs the company's philanthropic organization, directed me to her spokesperson, who declined to answer questions on the record.

The guarded approach extends to the company's physical territory. Security officers carefully patrol the sidewalks around the CMA CGM Tower in Marseille, enforcing a strict no-photo policy on their property. One guard even threatened to call law enforcement when this reporter took photos from the public sidewalk.

"[Jacques Saadé] was very, very marked by the fact that their entire fortune in Syria had been confiscated," a former CMA CGA employee said. "He wanted to show he could remake everything from scratch."

A former employee of CMA CGM who worked closely with Rodolphe Saadé and his father, Jacques Saadé, said the firm's response was no surprise. The senior leadership does not like publicity, and it doesn't help that the current chairman and CEO is not the most media-savvy executive. "He's timid. He's very closed-off," the former employee said. "He doesn't like talking to people. He doesn't look you in the eye when he talks to you."

In that respect, he's very different from his father, the immigrant founder of CMA CGM who led the company until he died in 2018. Jacques Saadé "was the prototype of the company founder, very charismatic, very bon vivant," the ex-employee said. "The son is the opposite. He's very careful about what he eats, he works out all the time—he's not a bon vivant at all."

The Saadé clan remains close-knit, forged by the family's complicated history of loss and regeneration. Before immigrating to France from Beirut in the midst of Lebanon's brutal civil war in the 1970s, Jacques Saadé had been forced to flee Syria after the Baathist regime nationalized the family's vegetable oil and tobacco business. "The father was very, very marked by the fact that their entire fortune in Syria had been confiscated," the former employee said. "He wanted to show he could remake everything from scratch. Since he couldn't do it in Syria, he started over in Beirut, and then in Marseille."

Integrating in Marseille has been a long process, but it was particularly rough when the family first arrived. Despite being Christians from the Levant, the Saadés were often lumped together with the city's much larger immigrant population of North African Muslims, subjected to France's anti-Arab stigma. "I know they suffered a lot from it when they first arrived," the ex-employee said.

The family bonds were tested in 2009. After the Great Recession pushed the carrier to the brink of bankruptcy, creditors involved in the restructuring of debt pushed for changes in senior management. Jacques himself stepped down from his post as CEO. But according to the former employee, the founder pushed hard to maintain family control of the company, hoping to ensure his son would be able to take over the reins. Ultimately, the gambit paid off: CMA CGM recovered quickly and won an influx of cash from Turkish investors, paving the way for Jacques to win back his old post just a couple years later. Executive-in-waiting Rodolphe was appointed CEO and chairman in 2017, a year before his father died.

While the 2009 crisis shined a light on the company's strategic benefits, the last couple of years have delivered renewed awareness of CMA CGM's geopolitical weight, including at the highest levels of the state. With his newfound clout, Rodolphe Saadé has accompanied President Emmanuel Macron on high-profile visits to Algeria, Lebanon, and the United States. What both men seem to understand are the mutual benefits of a cash-rich maritime shipper willing to serve the interests of the country in which it's headquartered.

"The development of CMA CGM has placed them, de facto, at another level of discussion," said Sabrina Agresti-Roubache, a deputy from Marseille in the French National Assembly who accompanied Macron and Saadé on the Algeria trip last August.

All the instability has helped, too—with the pandemic, Russia's war in Ukraine, and Europe's energy woes all highlighting the advantages of having a domestic shipping giant. Amid these crises and ensuing climate of uncertainty, CMA CGM offers the promise of sustained container shipments to and from France, keeping the supply flowing for basic goods such as food, medicines, and electronics.

"It's important to have national shippers that are able to transport goods to the benefit of a country, especially if there's a [crisis]," Coutansais of CESM told Foreign Policy. "Having a national shipper is important because you can continue to supply your country. … In this sense, it's an element of French sovereignty."

"Having a national shipper is important because you can continue to supply your country. … In this sense, it's an element of French sovereignty."

MSC, Maersk, and Hapag-Lloyd enjoy warm relations with their respective host nations. But a fundamental difference between France and its European neighbors is that Paris has a much larger swath of territory to keep supplied—a fact that can often go overlooked outside the country. Thanks to its overseas territories, France claims the world's second-largest maritime territory, a measure that includes both immediate coastal waters and the much larger exclusive economic zones that extend beyond these. (France claims more such territory than any country other than the United States.)

Pockets of French consumers are spread around the globe: in places such as Réunion in the Indian Ocean, French Guiana in South America, the Caribbean islands of Martinique and Guadeloupe, and the far-flung Pacific territories of New Caledonia and French Polynesia. The Marseille-based shipper plays a vital role on these routes, which aren't especially lucrative. "One of the particularities with France is the overseas territories and the connectivity between the overseas territories," said Paul Tourret, the director of the Higher Institute of Maritime Economics, a research institute based in the Atlantic coast city of Saint-Nazaire, the heart of France's shipbuilding industry. "CMA CGM helps keep the direct lines open."

The company itself is increasingly leaning into patriotic rhetoric, with Saadé now publicly describing CMA CGM as an "instrument of sovereignty for our country." And as soaring inflation has driven calls for the state to aid French households, the carrier has moved to reduce freight rates for importers in mainland France and the overseas territories for a full year. Since last August, these consumers have received a discount of 750 euros per standard container, a special rate that initially amounted to a 25 percent knock-off but one that grows even more attractive as freight rates continue to fall.

French President Emmanuel Macron and Chinese President Xi Jinping applaud as Rodolphe Saadé (right foreground) and Lei Fanpei, the president of China State Shipbuilding Corp. (left foreground), take part in a signing ceremony in Paris on March 25, 2019, as part of a state visit. YOAN VALAT/AFP via Getty Images

One maritime shipping expert suggested the discounts were designed to slow momentum behind calls for a tax on superprofits, part of a charm offensive to gain goodwill from politicians who would otherwise be champing at the bit for windfall taxes. Even so, they’ve helped keep shipping costs in check for French companies.

Some of the firm's recent acquisitions have also aligned nicely with the interests of the French government. While CMA CGM's investment in Air France-KLM offered the Saadés an attractive foothold in air cargo, it's also expected to help the national airline pay back a public bailout offered in the early days of the pandemic. Likewise, CMA CGM's recent takeover of Gefco, a French-founded trucking firm in which the Russian government acquired a majority stake in 2012, didn't just strengthen the Saadés’ logistics empire. It also ensured the repatriation of a French company after Russia's invasion of Ukraine.

According to Tourret, CMA CGM's private ownership structure helps serve national interests. Since the Saadés have a firm grasp on the company and don't have to worry about pleasing a wide array of public shareholders, Tourret argued, they’re free to make more strategic investments. "It's in our interest to have these large family-held companies in which, to use a French expression, we give them the keys to the truck," he said.

That appears to be Macron's approach with CMA CGM—a 21st-century version of what the French call a "national champion," a major corporation that competes internationally while offering a range of benefits to domestic consumers. Historically, the list has included companies such as Air France (air travel), Alstom (rail), Renault (cars), TotalEnergies (energy), and EDF (electricity), all of them backed through either public ownership or hefty public investment at some point. CMA CGM may be privately run, but it's also the inheritor of France's state-owned shipping company, the Compagnie Générale Maritime, which struggled for decades before Jacques Saadé bought it out in 1996.

"The idea is, ‘You have transport and logistics in France, you’re holding down the fort, and ultimately, we prefer that you keep it as opposed to being at the mercy of a big American or German company that can engage in arbitrage against us,’" Tourret added.

There is another benefit provided by CMA CGM that shouldn't be understated. In recent years, the Saadés have expanded their presence in their hometown of Marseille, the socioeconomically troubled city with which they had maintained somewhat distant relations since Jacques Saadé founded the firm in 1978.

The Jules Verne is seen from Saint-Jean Fort on arrival in the Port of Marseille on June 3, 2013. ANNE-CHRISTINE POUJOULAT/AFP via Getty Images

"This is a very pauperized city," the Marseille-based writer and crime novelist François Thomazeau told me at a cafe in Noailles, a low-income downtown neighborhood known for its bustling street life and large population of immigrants from North Africa. "When the French colonial empire collapsed, the economy of Marseille fell apart. … It lost its raison d’être."

Just a few blocks away from the cafe where we met is a terrible symbol of the city's economic decline: In November 2018, two dilapidated apartment buildings collapsed on the Rue d’Aubagne, resulting in the deaths of eight people. The tragedy exposed the poor state of housing but also seemed to highlight the stunning neglect of public officials for the residents of France's second-largest city.

Despite pockets of wealth, Marseille continues to suffer from a lack of good-paying jobs. Starting just a couple blocks away from the CMA CGA Tower, the city's third arrondissement is regularly described as one of the poorest neighborhoods in all of Europe: More than half of its residents live below the poverty line, according to the French statistics agency. Not much farther sit the so-called "northern neighborhoods," plagued by a lack of basic public services and a reputation for drug-related violence. Citywide, the unemployment rate sits at 17 percent.

With nearly 3,000 employees, CMA CGM has been the city's largest private sector employer for some time. That isn't new—but the firm's financial commitment to the city has grown. In 2019, the company moved the headquarters of Ceva Logistics from Geneva to Marseille, adding 200 prized white-collar jobs to the local tax base. The same year, Rodolphe Saadé inaugurated a start-up incubator in the city. Last year, the firm unveiled plans to open a sparkling new training and research center for the logistics and transport sectors by the end of 2023. Under the leadership of Tanya Saadé Zeenny, the CMA CGM Foundation has poured money into local initiatives, including a partnership with a nearby national park and support for nonprofits working in the city's impoverished neighborhoods.

Then, in September 2022, Rodolphe Saadé acquired a majority stake in the regional newspaper La Provence for 81 million euros, massively outbidding his closest competitor. And in November, CMA CGM bought the sponsorship rights to the jersey of the city's beloved soccer team, Olympique de Marseille (OM), effective next season. In the birthplace of soccer legend Zinedine Zidane, a city where the team's blue-and-white jerseys are spotted just about everywhere, the latter acquisition will almost certainly make CMA CGM a household name. (It has also fueled speculation that the Saadés may buy the team outright.)

People hold banners and portraits of victims as they demonstrate against unsafe and unsanitary housing conditions in Marseille's city center on Nov. 14, 2018, nine days after two buildings collapsed in the working-class district of Noailles, near the bustling port. SYLVAIN THOMAS/AFP via Getty Images

In the eyes of many Marseillais, the family is finally emerging from the isolated business district it has been confined to for decades, near the part of the port where cruise ships dock.

The fresh investment is also welcome news for Macron, whose government recently unveiled a much larger aid plan of its own for Marseille, the latest in a long tradition of the state intervening to support the city. "They go together well," said French deputy Agresti-Roubache, the daughter of Algerian immigrants who grew up in the shadow of the CMA CGM Tower. "Positive things are happening."

"Marseille has never been the capital of anything, but maybe this dream is there … to make Marseille an important maritime hub."

A boyhood supporter of OM, Macron also happens to have a well-documented fondness for Marseille. That can provoke eyerolls in much of the city, where left-wing populist Jean-Luc Mélenchon received more first-round votes than anyone else in the last two presidential elections, but those within Macron's inner circle insist his affection is real.

And the Saadés appear to have a long-term vision for Marseille.

One dream scenario would be the transformation of the city into a larger center for shipping and logistics. Despite its connection to the sea, the reality is that Marseille doesn't actually support a significant number of jobs in either sector. In fact, the major commercial port is far from the city itself, located about an hour northwest in the industrial zone of Fos-sur-Mer. Sustained investment would see the city join the likes of Antwerp, Hamburg, and Rotterdam as a major transit nexus.

"There's also this question that returns over and over again, which is, what's the true capital of the Mediterranean?" said Thomazeau, the Marseille-based writer. "Marseille has never been the capital of anything, but maybe this dream is there … to make Marseille an important maritime hub."

The Saadé family has also expanded its investments in Lebanon, pouring money into the country after the 2020 explosions at the Port of Beirut. In 2021, they bought the Port of Tripoli's container terminal, and last year, they bought the capital's container terminal, which emerged relatively unscathed from the disaster. They’ve also signaled interest in acquiring L’Orient-Le Jour, Lebanon's only French-language daily newspaper. But as in France, the Saadés are avoiding the spotlight. As Joseph Bahout, the director of the Issam Fares Institute for Public Policy and International Affairs at the American University of Beirut, puts it, they like influence without attention.

Yet, despite their personal wishes, the family's jaw-dropping wealth and profits have made the spotlight all but unavoidable in France. After capturing dozens of seats in last June's legislative elections, France's new left-wing legislative coalition has called for a tax on superprofits, taking aim at firms that, like CMA CGM, have seen "exceptional" spikes in revenue since the pandemic and the onset of Europe's energy crisis. Last year, Rodolphe Saadé was forced to appear before two parliamentary commissions—one in the Senate and one in the National Assembly—in which he defended his company's business model and highlighted the negative consequences of a proposed tax.

"If I’m penalized because I have to pay a special tax, what are my competitors going to do? Are you going to bring them in for a hearing as well?" Saadé asked the National Assembly commission in September.

Manuel Bompard, a deputy from the left-populist party La France Insoumise who co-chaired that hearing, insists the superprofits tax isn't aimed personally at the Saadé family. Recently elected to a district in central Marseille, he told me it's a question of economic justice. "It's not about penalizing this company, in particular," he said in an interview in his office, a short walk from CMA CGM's headquarters. "I’m just saying, when you have a family whose wealth has increased by 30 billion euros in one year, it's not illegitimate to ask that a small part of that go to people for whom life has been more difficult."

Despite their personal wishes, the family's jaw-dropping wealth and profits have made the spotlight all but unavoidable in France.

"They finance a lot of programs, and they have this kind of philanthropic role," Bompard added. "But when you’re attached to social justice, everything can't just be done at the mercy of employers or large corporations. … I don't think it's the French vision either, which is a country attached to social equality. We believe there's a tool for redistribution, which is taxation."

Those efforts are likely to come up short, at least for now. When we met last November, Bompard conceded it would be unlikely that the National Assembly—controlled by a relative majority that backs Macron—would vote for such a tax by the end of the year. He said it’d be difficult to impose a retroactive levy on windfall profits.

Still, all the focus on windfall profits can sometimes obscure an arguably bigger structural question, which is the existence of an extremely preferential tax regime. Since 2003, CMA CGM has benefited from what's known as the "tonnage tax," a levy calculated according to the quantity of goods a company handles as opposed to the revenue it generates. Imposed around the same time across the European Union, the measure was designed to keep shipping giants headquartered in Europe. In France, CMA CGM pays an effective rate of just 2 percent on its profits, as opposed to the standard corporate tax rate of 25 percent.

At the September parliamentary hearing, Saadé suggested that any increase in the tax burden faced by European carriers would put them at a disadvantage. "If a European tax is put into place, what do we do about the Asian companies?" Saadé asked. "If a tax is going to be put into place at all costs, then it needs to be worldwide."

That is a worthy proposal. But what Saadé neglected to mention is that there was recently just such an effort to impose a higher uniform rate on shippers worldwide—and his industry helped shoot it down. Unveiled in October 2021, the landmark global corporate tax agreement that sets a 15 percent minimum and aims to tax firms based on where they’re doing business includes a key exemption: It largely does not apply to maritime shipping.

CMA CGM is a member of the World Shipping Council, which actively lobbied for excluding international shipping from the accord as details were being hammered out at the Organization for Economic Cooperation and Development (OECD). For its part, the French government mostly championed the push for a global tax deal, criticizing U.S. tech giants like Google, Apple, Facebook, and Microsoft for skirting their fiscal responsibilities. But according to someone closely involved in the global tax negotiations at the OECD, France's delegation did not push back very strongly against shipping industry efforts to carve out a loophole for the sector. (The French finance ministry did not respond to a request for comment.)

This was, in many respects, a master class in Saadé-style discretion: influence without attention. If the global minimum corporate tax does take effect, the shipping exemption will translate into billions of euros in savings for CMA CGM—a victory that’ll likely pay dividends for years and years to come.

Cole Stangler is a journalist based in Marseille who writes about labor and politics. He is currently writing a book on working-class Paris. Twitter: @colestangler

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