The Fusion between Alstom and Siemens: The End of the French “TGV”?

train à grande vitesse

Alstom, the French railway manufacturer – and at the origin of the TGV – will finally merge with the German group Siemens, the world leader in signaling products. In order to face the Chinese and American competition, the French industrial flagship thus becomes Franco-German under the name of ALSTOM-SIEMENS.
« France abandons its industry, its school, its political independence. The coast of alert of the country’s dismantling is in sight during this project! » confirms Jean-Luc Mélenchon, leader of “France insoumise”. Negociated since three months, this « fusion between equals » – promised by the government – generates reactions and worries from specific political parties and syndicates. Siemens will be the main shareholder with around 50% of the capital of the new entity, and the limit of 50,5% shall not be surpassed during the next four years according to the conditions set by the French government. Therefore, and to keep control of Alstom, the french government has forced specific measures for the German conglomerate, the general management will then be the responsibility of Alstom’s CEO (Henri Poupart-Lafarge), the global headquarters of the group will be located in France, and the level of employment of the French group would be maintained for four years as well. The Eurosceptic, however, judge these measures as ineffective, “The Alstom-Siemens merger, being presented as the birth of a European champion, is nothing less than a takeover of a French flagship by a German company,” says the FN group in a statement to the European Parliament. As a result, the government cannot reassure those who see this alliance as a “plunder” despite the power embodied by this new group. Alstom-Siemens will become the world’s number two in the rail industry and the number one in signaling, a union represented by a turnover of $ 15.3 billion and a combined order book of $ 61.2 billion euros, the latter competing with that of the Chinese group CRRC. Additionally, nothing would prevent the new group to strengthen by opening its doors to other European competitors: “I am convinced that this consolidation will integrate, when the time comes, Bombardier and more Spanish manufacturers [CAF]”, explains Bruno Le Maire, The Minister of Economy defending the European interests of this alliance. What remains to be seen is whether the economic interests of France will really be defended by this merger of the two European groups.
CRRC: A big competition for Alstom-Siemens
Born from a merger of two conglomerates controlled by the Chinese state and with a turnover twice as large as that of Alstom-Siemens (28.6 billion euros for 2016), China Railway Rolling Stock represents a large part of the global rail industry. Present on the African market, the Chinese group begins to make a place for itself on the American soil, even if it wipes some failures and it realizes for example only 8% of its sales on foreign soil. CRRC is trying to impose itself internationally but faces obstacles that the company does not face on Chinese soil (parliamentary opposition, resistance from environmental NGOs). The difficulties faced by CRRC and a good corporate strategy could allow the group to beat the Chinese Goliath. “We will not compete with CRRC on the price, we will compete with CRRC through our innovation,” says Henri Poupart-Lafarge, general manager of the future group.


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