Melkonian: the sounds of the underground

Groupe Melkonian began as a repair workshop whose customers included The Rolling Stones. Then Jacques Melkonian discovered underground mining and, second-generation chairman Geneviève Rambaud tells Bertrand Gobin, the family has never looked back

You won't find its logo displayed along the sides of roads; consumers have never seen its products in shops; and none of its brands are seen in adverts on TV. The least one can say about Groupe Melkonian is that it knows how to be discreet. 

The company, based in Aix en Provence in the south of France, works in the underground economy. Fortunately, however, it's not the underground economy that you read about in the news and that features in the courts. To understand what it is that the family business does, you have to descend several hundred metres underground to see the machines, designed or reconditioned as new by the group, at work.
 
Groupe Melkonian is managed by three associated presidents, each controlling an equal share, and each with equal power. They are Geneviève Rambaud and her two brothers Marc and Christophe Melkonian – the children of the couple who founded the business in the 1960s (pictured).

Specialising for more than 30 years in underground mine production, the company offers a wide array of equipment and services for the loading and transport of minerals through its various specialised affiliates. Sales of reconditioned machinery – the firm's speciality – or new machinery (including exclusive distribution of the Atlas Copco and Getman ranges), rental, bespoke solutions, maintenance, parts, user training: the company's services cover the whole range of client needs.
 
In recent years, and in particular because of the explosion in demand from China that has resulted in large increases in benchmark prices of primary materials, the group has been benefiting from good market conditions. Over the past 15 years, it has been experiencing double-digit growth, the result of the ambition of its three associates.

Due to the very international nature of mining activity and the company's policy of sustained growth, Groupe Melkonian currently has clients in 70 countries, spread over five continents. The share of its sales from outside France is 96%, a record which results in the group sometimes receiving visits from ministers in charge of foreign commerce. At the end of 2006, for example, Christine Lagarde, France's current Minister of Finance, came in person to open the new company headquarters. 

One of the things of which the directors are very proud is having kept 100% of the production in France, where they have around 100 employees. "It is a fact that [France's] exchange rates, high social security contributions and taxes make the task singularly difficult," Geneviève recently explained, "but we are proving that outsourcing is not unavoidable." The group is a good example of a business that, in this era of the strong euro, and the theoretically low competitiveness of France compared to countries where labour is cheap, is succeeding.

Keeping up with clients and markets
How does the group manage to break into new markets, in a context where its manufacturing costs have increased by more than 30% compared with companies producing outside the euro zone? First and foremost, the firm can expand into new markets through the flexibility of its organisational structure, and its ability to react quickly to changes. Because of its size (the firm is smaller than many of its competitors) Groupe Melkonian is able to react very rapidly to its clients' demands. Clients are evidently very anxious to avoid any breakdowns of production within their mines.

Besides the impressive stock of spare parts in Aix, including 650,000 parts that are available immediately, the company is supported by a network of 28 secondary facilities, situated close to the facilities of its principal clients. In certain countries, such as Mexico, or Kazakhstan, the affiliates comprise more than 10 people, bringing together business operatives and mechanical experts.

Reconditioning of machinery is at the heart of the company's competences. Historically, the business adapted construction equipment to the requirements of underground work: lowered ramps, reshaped chassis depending on the height of the tunnels, etc. These days, when sustainable development is important in all sectors of the economy, the Melkonians' reconditioning knowledge presents an important opportunity. "The idea is simple," Geneviève tells Families in Business. "The mines purchase new equipment but generally scrap it after four or five years. This puts a burden on our planet, and represents a real waste. We have looked for ways to recycle these machines and resell them, which also allows us to contribute to protecting the planet.

"The equipment – which has the same guarantees as new equipment – is resold at 70% of its new price. Our success with this product range is beyond what we had hoped for, and we are very proud of it. Of course, the secondhand market has always existed, but the idea of restoring the equipment to an 'as new' condition, with an identical guarantee to new equipment is different."

Strengthened through 20 years of partnership with the largest global constructors, Groupe Melkonian is now well positioned to offer its clients a complete, on-demand machinery reconditioning service – produced according to standards and guaranteed as new. This reconditioning service is very special and constructing new equipment is often more simple. "There are real constraints on reconditioning equipment, and it sometimes requires more time to recondition a machine than to make it new," says Geneviève.

Having said that, the company also manufactures new equipment under licence from constructors. A specialist subsidiary dealing in kinematic components has also been created. Futhermore, together with Griffet Machinery, Groupe Melkonian has diversified into the lifting and handling machinery sector.

Adaption and growth
Flexibility and adaptability are built into the DNA of this company. On several occasions in its history it has had to deal with events that have led it to reposition itself and review its strategies. This occurred, for example, between 1980 and 1995, when most of the 70 French national mining operations ceased operating. In 1994, just after the three children had taken over the business from their parents, they had no choice but to look for new clients outside of France, in order to continue to develop the business.

"The three of us all hoped to benefit from the experience of our parents, to see whether we were able to work together, and to find a way out for the business, which was heading for disaster in its national market," remembers Geneviève. "We therefore carried out a global market study. We quickly saw that the Melkonian ramp, invented by our father, had no future on the international market, since in each country underground construction specialists had adapted their equipment to the specific requirements of the local market. We therefore decided to convert our specialisations, our products and our clientele."

The risks for the family were big, because a lot of money was needed for this new development. In addition, there was little certainty regarding what would happen, even though all three of the siblings were convinced that with a team of trustworthy partners they were only going to succeed.

In order to ensure that their parents would not pay for decisions that could have been too ambitious or too risky, the children insisted on purchasing the business. "We insisted on that," Geneviève adds, "because we didn't want people to say, 'They didn't deserve it at all, they were happy to enjoy the fruits of their parents' hard work'." In 1994, Groupe Melkonian was created, and in the space of 14 years, the number of partners has increased from 18 to 135, and the sales figures have increased by a factor of 16.

Besides this economic success, which the Melkonian children continue to finance themselves, they also feel very happy to be able to work together. "When we started working at the company in 1988, our parents forced us, despite all our qualifications, to try out all the different jobs, including the most basic ones," says Geneviève. "This shared journey helped us to build a really strong relationship." On the operational front, each has their own role: Christophe is in charge of replacement parts and after-sales service; Marc deals with the machinery and production, while Geneviève works with them in
managing the group.

However, the big decisions are always taken by the three together. The Melkonian children place a lot of importance on family heritage in terms of the values which guide the management of the business: generosity, forgiveness, indulgence, respect in all circumstances, passion for work, ambition to better oneself, a desire to contribute and to make ones mark.

In social terms, they respect several fundamental principles in their relationships with their partners: especially trust  and honesty. "Our offices are always open," says Geneviève. "The eight people who worked here when the company was created are still here. No one has left." Another illustration of the positive social climate is that the group has never had to face any lawsuits.

If there is one area where the Melkonian children have moved away from the practices that were in force before they arrived at the company, it is management practices. "Our parents methods mostly consisted of trusting and allowing clients long delays but giving short deadlines to suppliers", explains Geneviève. "These were principles which brought a lot of success in their day, but which are totally different in our age."

Imagination and diversification
So, how is it that the family entered into the mechanical sector? It was at the age of 16 that Jacques Melkonian, Geneviève's father, opened his first car garage in Gardanne, near Aix. With his wife Angèle, he created his workshop, Garage Continental. It quickly acquired a very good reputation to the point where, several years later, the Rolling Stones came to him to have their Rolls Royce repaired when they were in Provence. 

One day, the technical manager of a potassium mine in Alsace sought the garage's help with a recurring problem he was having with his underground machinery. Stimulated by this challenge, Jacques set to work and came up with a new type of ramp, the MJ Melkonian Ramp. The level of technological innovation was such that the American constructor JOY decided to fit this ramp on all the machines it sold, which meant a global customer base. Realising that he had to choose between cars or machines, Jacques decided to specialise in mining equipment. Full of generosity, he and his wife then gave the garage to their 12 employees and started carrying out their mining equipment business under a new name: Continental Industrie, created in 1972.

A man with a rich imagination, Jacques had a new idea, and invented the concept of the standard exchange. Whenever a breakdown occurred, the client would send the defective piece to Continental, which would send back the same component, new or reconditioned, on the same day. The business discovered management of important stock as a new business area. For the most distant mines, special stocks of parts were put in place on the client's premises. A bill was only sent when a broken component was returned, proving that an identical piece had been taken from the stock.

For the Melkonian family, however, diversification into mining activities meant more than just a successful business venture. It also meant revenge for a terrible period in the family's history. Fleeing the Armenian genocide of 1915, several of the older members of the family found themselves in Marseille where, in order to survive, they were forced to work at the bottom of shafts in the lignite mines around Aix en Provence.

Nearly a century later and just a few kilometres away, their descendents, with officials of the French Republic in attendance, officially inaugurated the new headquarters of Groupe Melkonian.