The board of France-Corsica ferry operator SNCM on Monday voted out its chief executive who had sided with trade unions, allowing shareholder Veolia to retake control and restructure the loss-making firm.
Veolia wants to put Societe Nationale Corse Mediterranee under court protection to shield it from a European Commission order to repay 440 million euros ($605 million) of state aid and is looking for a buyer of a restructured SNCM.
Transport firm Transdev - itself a 50-50 joint venture between Veolia and state-backed Caisse des Depots (CDC) - owns 66 percent of SNCM but Transdev has not been able to impose its will at SNCM because the ferry company's chief executive and board chairman have sided with its unions and ignored instructions of their employer.
Transdev said it will appoint a new SNCM chief executive shortly and look for a solution for the firm, which has piled up losses for more than a decade and would go bankrupt if the EU order were executed.
"We want to allow SNCM to build a future, which involves neither a liquidation nor a jump into the dark," Transdev chief executive Jean-Marc Janaillac said in a statement.
An earlier attempt to oust SNCM board chairman Gerard Couturier failed as the French state representatives did not back the private shareholders, but Monday's vote to not renew the mandate of Chief Executive Marc Dufour succeeded as the state representatives abstained in the vote.
"It is normal that the management of a company can work in confidence with its principal shareholder," Transport Minister Frederic Cuviller said in a statement.
He added that the government would keep a close eye on the new management's plans for SNCM.
Veolia has said the old management's plan to buy four new ships at a total cost of up to 800 million euros was not realistic as it was based on unrealistic forecasts for ferry traffic growth and the firm lacks financing.
Both Veolia and CDC have said they will put no more new money into SNCM.
Last month, Transdev said it was in talks with Norway's Siem Shipping about the sale of its stake in the ferry operator but specified a sale would depend mainly on finding a solution for the state aid the Commission wants SNCM to repay.
Veolia argues the only way to shield SNCM from repayment is through court protection. SNCM's unions say the government and SNCM's appeal against the EU ruling can succeed and SNCM needs more time. They also want the government to renationalise SNCM by getting CDC to take a direct stake in the firm.
SNCM's CFE-CGM had warned the state against a decision that would give "free hand to a failing shareholder" and "opens to door to a rapid dismantling of the company".
The SNCM saga is a thorn in the side of the socialist government of President Francois Hollande, who fears social unrest in Marseille with European elections just two weeks away.
Local politicians in Marseille led by conservative mayor Jean-Claude Gaudin have called on the state to help SNCM, which employs 2,600 staff and provides work for some 2,400 suppliers.
Ahead of SNCM's partial privatisation in 2006, there were weeks of strikes and protests in Corsica and Marseille.
"The French government is petrified by the thought of a major social conflict that would paralyse Marseille," French daily Le Parisien quoted an insider as saying.
($1 = 0.7269 Euros)
(Reporting by Geert De Clercq. Editing by Jane Merriman and David Evans)