French minister defends Alstom-Siemens deal

Jerome Frank
September 28, 2017

Siemens Alstom will employ 62,300 people.

Alstom is the manufacturer of France's famous TGV trains.

A new entity - Siemens Alstom - will run the pair's respective French and German rail operations after the signing of a Memorandum of Understanding on Tuesday.

The new group, called Siemens Alstom, will be led by Alstom chief executive Henri Poupart-Lafarge.

French Finance and Economy Minister Bruno Le Maire told reporters Wednesday that the deal is crucial given growing competition from Chinese train makers to meet worldwide demand for the kind of high-speed trains once exemplified by Alstom's TGVs. "This will give our customers around the world a more innovative and more competitive portfolio", said Joe Kaeser, President and CEO of Siemens AG.

In a joint statement, the firms said their businesses were "largely complementary" and the merger would enable customers to benefit from a "larger geographic footprint".

This Franco-German merger of equals sends a strong signal in many ways.

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"Politicians will also likely try to ensure some form of jobs protection in France (28 per cent of Alstom's workforce) and Germany (39 per cent of Siemens'workforce), making cost synergies hard to extract", analysts wrote in a note. The business headquarters for Mobility Solutions will be in Berlin, Germany, and the business headquarters for Rolling Stock will also be in France.

The new company is meant to be a "European champion", competing more effectively with the Chinese state-owned rolling stock builder CRRC.

Another leading member of the party, Xavier Bertrand, agreed, dubbing the combined group a "fake rail Airbus".

French and German leaders have for years called for the creation of "European champions" such as Airbus AIR.PA to capitalize on the strengths of Europe's single market and create the scale needed to compete with USA and Asian rivals.

Alstom shares were up 7 per cent in early trading, the top-performing stock on France's SBF-120 index, touching their highest level since July 2011.

Yet Siemens, too, had seen the writing on the wall as overcapacity in Europe ate into rail margins, accentuated by the entry of Shinkansen partner Hitachi, which established its global headquarters and a major factory in the United Kingdom after winning a 5.7 billion-pound ($7.68 billion) express-train contract there.

Other reports by Guamnewswatch

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