Alstom enter talks with Siemens over rail merger

Discussion in 'UK Railway Discussion' started by aformeruser, 22 Sep 2017.

  1. aformeruser

    aformeruser Veteran Member

    Messages:
    30,637
    Joined:
    23 Jan 2009
    https://twitter.com/Clinnick1/status/911270641210454019

    I wonder if this means the Siemens/Bombardier deal has fallen through?
     
  2. Registered users do not see these banners - join or log in today!

    Rail Forums

     
  3. daikilo

    daikilo Established Member

    Messages:
    1,560
    Joined:
    2 Feb 2010
  4. MCR247

    MCR247 Established Member

    Messages:
    9,082
    Joined:
    7 Nov 2008
    That would seem a lot more favourable to the EU than the Bombardier Transportation/Siemens rumour
     
  5. daikilo

    daikilo Established Member

    Messages:
    1,560
    Joined:
    2 Feb 2010
    Not neccessarily "more favourable" as Bombardier is not in a good financial health and has stated they are trying to offload some of their rail business and that they will cut jobs at certain of their German plants anyway.

    It does however suggest something big is about to happen. What disturbs me is why Alstom may be ready to part with even more of their businesses and who else could be interested.
     
    Last edited: 23 Sep 2017
  6. daikilo

    daikilo Established Member

    Messages:
    1,560
    Joined:
    2 Feb 2010
    More media comment today suggests that Alstom has also been talking to Bombardier but has been unable to find a suitable structure for oversight http://www.estrepublicain.fr/actualite/2017/09/24/alstom-se-rapproche-de-plus-en-plus-de-siemens
    Most commentators I have read believe that whatever happens there will be a rationalisation of product lines which probably means production sites, which could lead to some form of state intervention, particularly in France.

    Tuesday 26/9 is confirmed for an Alstom board meeting.
     
  7. tranzitjim

    tranzitjim Member

    Messages:
    209
    Joined:
    4 Jun 2013
    Location:
    Australia
    Why not a three way merger. Alstom, Siemens and Bombardier too?
     
  8. Olaf

    Olaf Member

    Messages:
    1,053
    Joined:
    29 Mar 2014
    Location:
    UK
    That would add another degree of complexity. The talks between the parties would have been about two-way mergers to date. You would have a three-way negotiation of structure of the deal and organisations, there would be considerable over-lap in product lines, plant, support services, business services, all of which would need rationalisation, which costs a lot of money, time, and senior human resources. The costs would most likely out-weigh the financial benefits well into the medium term with no promise that the organisation would survive let alone thrive. Investors would need to see solid justification, which would take time, which in the case of Bombardier, it does not have. Even if you get through all that, the competition authorities from anyone of a number of jurisdictions will cry foul. You would also have major political manoeuvring for domiciliary.

    The Alstom-Siemens merger is not optimum one for the new organisation, but it aligns with the Franco-German axis, so that is the most likely deciding factor.
     
  9. LNW-GW Joint

    LNW-GW Joint Veteran Member

    Messages:
    13,670
    Joined:
    22 Feb 2011
    Location:
    Mold, Clwyd
    Bombardier are already downsizing in Germany.
    http://www.railwaygazette.com/news/...-at-bombardier-transportation-in-germany.html
    This is probably independent of the current merger/JV negotiations.
     
  10. Olaf

    Olaf Member

    Messages:
    1,053
    Joined:
    29 Mar 2014
    Location:
    UK
    Yes, correct. That is part of a three year program instigated by the investment funds to rationalise the business. Things have deteriorated since the plan was put in motion, so I have no doubt that they were already looking at a revision to the plan. An adverse decision today will no doubt precipitate further action.
     
  11. hwl

    hwl Established Member

    Messages:
    4,883
    Joined:
    5 Feb 2012
    In Switzerland it looks like the harsher cuts have already started at Bombarider.

    There have been more than just the 3 big players looking at joining up over the past 18 months with the smaller firms involvement falling by the wayside early on due to deal complexity and every firm having problems so little to be gained by adding more problems to the mix.

    The Alstom deal is a more realistic possibility under the new French Government than the old one hence it coming back very late in the day.

    There will still be lots of politically unpalatable job losses unless some existing contracts can be reviewed.

    Alstom were burning through the cash pile from the GE deal rather more quickly than is sensible as they effectively couldn't cut (enough) jobs.

    I'd expect some movement from the others when the dust has started to settle on the big deal.
     
    Last edited: 26 Sep 2017
  12. hwl

    hwl Established Member

    Messages:
    4,883
    Joined:
    5 Feb 2012
    Even more options were looked that just those 3 firms. Just too complicated and too many problems.
     
  13. daikilo

    daikilo Established Member

    Messages:
    1,560
    Joined:
    2 Feb 2010
    Quite the contrary I suggest, Bombardier made it very clear that something had to happen for the Rail branch to be seen as competitive. I think they have got what they wanted by internal restructuring leaving Alstom and Siemens to work out what they have to do to match, and to compete with CAF, Talgo, Stadler and Hitachi, let alone CRRC.

    Where I think Alstom and Siemens have an issue is the longer term contracts for products like Alstom Prima in India, and TGV/AGV/Coradia in France and Siemens Vectron and Desiro in various countries, which is possibly why one will be folded into the other for management purposes, but the product range and plants will be slow to evolve.
     
  14. HowardGWR

    HowardGWR Established Member

    Messages:
    4,769
    Joined:
    30 Jan 2013
    Both sites in the former DDR, I notice. :((
     
  15. hwl

    hwl Established Member

    Messages:
    4,883
    Joined:
    5 Feb 2012
    Automation of welding and reallocation of welding bodyshells to other plants in the former eastern block for both plants and in the case of Henningsdorf (ex AEG pre 1945 and post 1992) the change from a does everything plant to a more focused plant like Derby.

    Bombarider finally integrating its purchases of 10-20 years ago!
     
  16. MisterT

    MisterT Member

    Messages:
    294
    Joined:
    12 Oct 2014
    Location:
    The Netherlands
    According to the Financial Times, the French government has "approved" the merger between Siemens and Alstom:
    https://www.google.nl/amp/s/amp.ft.com/content/646412aa-a28a-11e7-9e4f-7f5e6a7c98a2?espv=1

     
  17. hwl

    hwl Established Member

    Messages:
    4,883
    Joined:
    5 Feb 2012
  18. Dr_Intoxicated

    Dr_Intoxicated Member

    Messages:
    361
    Joined:
    5 Jan 2014
  19. daikilo

    daikilo Established Member

    Messages:
    1,560
    Joined:
    2 Feb 2010
    Presumably "closing" is the relevant word as even Alstom says they have backlog covering on average only about 40% of the industrial capacity.

    Board/Governance meetings in progress this p.m.
     
  20. 68000

    68000 Member

    Messages:
    592
    Joined:
    27 Jan 2008
    From a signalling perspective, this is bad news for UK taxpayers as we loose another supplier therefore no real competition in the signalling renewal and enhancement market. Alstom & Siemens have the market for major signalling sown up for CP5 and what now for CP6?
     
  21. MisterT

    MisterT Member

    Messages:
    294
    Joined:
    12 Oct 2014
    Location:
    The Netherlands
    It's official now:
    Via Bloomberg
     
  22. 43096

    43096 Established Member

    Messages:
    6,168
    Joined:
    23 Nov 2015
    That alone should have been enough for Siemens to walk away. Never, ever, ever, engage in joint ventures with the French - they will just use it for their own ends rather than the good of the partnership overall. Just look what happened with GEC when it went into a JV with Alsthom.

    As for Belfort, why keep it open? A sane decision would transfer what remains of TGV power car production either elsewhere in France or to München. Watch the JV decide to close München Allach instead and either ditch Vectron in favour of Prima or shift production to Belfort.
     
  23. LNW-GW Joint

    LNW-GW Joint Veteran Member

    Messages:
    13,670
    Joined:
    22 Feb 2011
    Location:
    Mold, Clwyd
    So, it's Siemens Alstom, with rolling stock HQ in Paris, signalling HQ in Berlin.
    It rather puts the spat between Alstom and Siemens about the Eurostar 374 order into context (which gave us the EU's 10-day standstill before contract signature).
    It certainly skews the signalling market, with rationalisation of UK assets likely.
    It will also put their depots and maintenance businesses together (Widnes, Longsight, Ardwick etc).
    The EU regulators may well have something to say about the deal.
    Both companies also have some projects in progress with Bombardier.
     
  24. LNW-GW Joint

    LNW-GW Joint Veteran Member

    Messages:
    13,670
    Joined:
    22 Feb 2011
    Location:
    Mold, Clwyd
    GEC were happy to get shut of their power arm (and anything else not connected to defence).
     
  25. Billy A

    Billy A Member

    Messages:
    169
    Joined:
    9 Jan 2017
    Judging by sales of the Vectron and the lack of sales (in Europe) of the Prima I can't see this happening in any rational world. It'll be Siemens call anyway, they'll have the majority shareholding.

    Closing Krefeld where they make multiple units would happen first.
     
  26. daikilo

    daikilo Established Member

    Messages:
    1,560
    Joined:
    2 Feb 2010
    It seems the french state will step aside by mid-October. My interpretation is that Siemens know they will win in the end thus acceeded to short-term niceties. It doesn't help us work out what will be the product line in say 2 years but I am pretty sure Alstom will have their share.
     
  27. Olaf

    Olaf Member

    Messages:
    1,053
    Joined:
    29 Mar 2014
    Location:
    UK
    Alstom - Siemens and Alstom join forces to create a European Champion in Mobility
    http://www.alstom.com/press-centre/...es-to-create-a-european-champion-in-mobility/
    - 2017-09-26

    There is an identical post on the Siemens site.

    The above suggests that the changes arising from a successful conclusion will become more apparent in 2021/2022.

    The EUR 470 mm is quite a large sum to take out of the existing businesses - such cost savings are not normally achieved. The figure implies that the redundancies could be somewhere around 2000 and upwards to start with.

    This is the second-best option for Siemens:

    • There is a higher degree of over-lap - as stated above,
    • Alstom has a large cash pile, a large part of which will be distributed as dividends to existing shareholders, but it's operating margins are very low - at about 5.6%. That implies that there will be a lot of effort needed to get the Alstom operations up to Siemens standards and the projected margin for the new business of 8%. There is no doubt going to be a lot of friction with the unions in the Alstom operations over any re-organisation, rationalisation, and efficiencies besides that coming over the next few days/weeks.
    • Very different work cultures; Siemens has a greater degree of similarities with BT.
    • Almost certainly politics and statesmanship was a significant factor in this outcome, rather than commercial rational.
    • Not sure that it builds the Digital/Signalling side of the business to the extent that would have be achievable via a merger with Bombardier.
    • Leaves the French with the control of the vehicle manufacturing business which Siemens was looking to largely contract-out and/or relocate to Poland. This will cause difficulties down the line both political and on product pricing against other manufactures such as Hitachi and the Chinese.
    • The senior management are now going to be tied-up with merger issues for about 18 to 24 months for starters, so they will not be fully focused during that time - a common feature of large mergers.
     
    Last edited: 27 Sep 2017
  28. Olaf

    Olaf Member

    Messages:
    1,053
    Joined:
    29 Mar 2014
    Location:
    UK
    That relates to the shares in Alstom that the French state borrowed from Bouygues; it had a purchase option on the shares which it will now renounced.
     
  29. CdBrux

    CdBrux Member

    Messages:
    544
    Joined:
    4 Mar 2014
    Location:
    Munich
    This points to a potentially difficult time ahead as this seems to be to a large part by EU, particularly French, nationalistic protectionism. Merging two different cultures is not to be underestimated, it's apparently the biggest reason why mergers do not work or achieve the potential they were supposed to.
     
  30. hwl

    hwl Established Member

    Messages:
    4,883
    Joined:
    5 Feb 2012
    A) It don't believe those cost savings will be achieved either

    B) They both have a lot of issues to deal with before even worrying about the merger (Higher cost /than BT, Hitachi at the top quality end of the market and new products not having quite the right specification for buyers.

    C) lots of that Alstom margin has come from juicy contracts (e.g.the maintain part of build and maintain /turn key) the type of which are far fewer on the ground now, so the actual rolling stock build margin is appalling based on their cost base.

    D) what happened to the SFO investiagations into a couple of Alstom's non european contracts wins. Siemens has very strict tendering policies after a previous knuckle wrapping... Most of Alstom sales tactics outside the EU may need to be binned!

    E) this is going to be cultural train wreck
     
  31. HH

    HH Established Member

    Messages:
    4,108
    Joined:
    31 Jul 2009
    Location:
    Essex

Share This Page