Rumour: Bombardier and Siemens rail merger

[thenorthern]

On East Midlands today tonight it briefly mentioned that there were talks between Bombardier and Siemens to merge their rail business although Bombardier is denying it. Anyway this is what the Wall Street Journal has to say.

Siemens, Bombardier Held Talks Over Train Merger

German industrial conglomerate Siemens AG has held talks to combine its rail unit with Canada-based Bombardier Inc.’s train business, people familiar with the matter said.

In past weeks, talks between two of the world’s largest train makers were at an early stage and a deal was far from guaranteed, the people said. Bombardier has also talked to other possible partners, two of these people said.

A Bombardier official in Canada denied that his company is in formal talks now with Siemens, and declined to discuss any possible past discussions. Bombardier continues to pursue its previously disclosed plan to sell part of its train-manufacturing business in an initial public offering on the Frankfurt Stock Exchange this fall and “evaluate other strategic opportunities,” said John Paul Macdonald, senior vice president for human resources and public affairs for Bombardier. “We are looking at industry consolidation, but there are no formal discussions” with Siemens, he said.

A Siemens spokesman declined to comment on possible talks with Bombardier.

“There is little specificity around Bombardier’s plans to float the minority stake in its rail business in Germany later this year, but there are two issues at play. One is cash … [and the] other is consolidation, since the creation of a Chinese powerhouse through the merger of CSR Corp. and China CNR makes the landscape more challenging and elevates the importance of scale,” J.P. Morgan analysts said in a recent note. The analysts put a price tag of $5.1 billion on Bombardier’s train unit.

http://www.wsj.com/articles/siemens-bombardier-in-early-stage-talks-over-train-merger-1438159513

Given that a large of new British trains are built by either Siemens and Bombardier I think this could be interesting if it does happen as it could mean that some Siemens trains for the UK may be built in Derby although a merged company may wish to have less factories and Derby would probably be the first for closure.

What does everyone else think?

 

[MCR247]

Interesting. Even if they are looking to close factories, I'm not sure Derby would go. With Hitachi soon to have a factory here, keeping Derby open would seem like a good idea.

 

[kevconnor]

I think the first major issue for any such merger would be it may be subject to multiple competition enquiries including at national and European level.

 

[MarkyT]

I wonder what would happen with the signalling side of the business. Siemens already bought their way into the UK market in a big way with their acquisition of the former Westinghouse business from Invensys a few years ago, after their initial foray was rather less than fully successful (Dorset Coast, Portsmouth).

Getting their hands on an established UK train manufacturing site and all that UK specialist knowledge and experience could be a similar strategy in rolling stock. There's Probably more opportunity for plant rationalisation in continental Europe where there are many more sites under the combined banners of both companies.

 

[zuriblue]

Siemens and Bombardier are already cooperating, for instance on the new EMUs for the SNCB in Belgium. It will probably mean they will offload some plants (same as when Bombardier took over Adtranz the Berlin Pankow plant was sold to Stadler)

 

[SpacePhoenix]

If they did merge would both Aventra and Desiros still be made or would one be axed (and which)?

 

[185]

It went flying round yesterday, but Bombardier have already denied it.

I reckon it's real btw.

 

[WatcherZero]

We have known for a long time Bombardier wanted to raise cash by reducing or eliminating its presence in the rail market to support its failing aviation business.

This could be more telling about Siemens thinking though, would indicate they are worried about Hitachi and others trying to break into the European market and are trying to counter.

 

[Lockwood]

It went flying round yesterday, but Bombardier have already denied it.

I reckon it's real btw.

First rule in politics: never believe anything until it's officially denied.

 

[northwichcat]

If they did merge would both Aventra and Desiros still be made or would one be axed (and which)?

Maybe they'd still offer both products and see what operators want to order?

 

[bussnapperwm]

First rule in politics: never believe anything until it's officially denied.

You watch Yes Minister don't you?
--- old post above --- --- new post below ---
It'd be interesting to see if it did happen as maybe we'd get some products from Derby that don't fall apart (half the door buttons keep coming off and toilets on LM's 172s seem to have problems!)

 

[LNW-GW Joint]

Maybe they'd still offer both products and see what operators want to order?

That's not what cash-strapped businesses do, unless it's a JV.
The whole point of a merger would be to consolidate manufacturing and design.
Siemens is the stronger business of the two, as we've seen with the Thameslink order.
The UK is a small market, relatively speaking, so the decisions will be probably be based on the prospects for the continental market.
Hitachi have just bought parts of Ansaldo in Italy.
Alstom have been a bit quiet lately, but they are in retrench mode after a bad spell.

 

[MarkyT]

In signalling, a merger could reunite all the former BR regional design offices that were split between the supplier companies at privatisation. They had been consolidated under a Central Services group in the BR sector reorganisation, and whilst each had been pretty self-sufficient under the regions, they had always cooperated to a varying extent in sharing staff, resources and even work on occasions, and all had a professional reporting line to the BRBs S&T engineering head.

 

[68000]

I thought Atkins had the Interlogic rump after Bombardier got rid of that a while ago

 

[thenorthern]

Given that both Siemens and Bombardier Transportation are both based in Germany I reckon that the German Government would want some assurances about German jobs before sanctioning a merger.

 

[Lockwood]

You watch Yes Minister don't you?

It's still so relevant to so many things.

 

[FordFocus]

I can see EU competition issues although the introduction of Hitachi in Europe could damped any concerns provided they create a European product of some kind.

I don't believe Derby needs to worry. Siemens bailed out of Crossrail because it couldn't meet production requirements so perhaps there is enough work in the medium term for both.

 

[Domh245]

Perhaps Siemens are on the lookout to boost manufacturing capacity, in which case the manufacturing staff at Derby don't need to worry (desiros finally being built in the UK - with or without the derby rattle?) but the designers and engineers might be in trouble

 

[WatcherZero]

Perhaps a reason that Bombardier is suddenly looking at a larger disposal than planned, they've today announced deliveries of their next plane, the Global 7000, will be delayed two years from 2016 to 2018.

 

[HilversumNS]

A Bombardier official in Canada denied that his company is in formal talks now with Siemens

My bold, I think that is the key word in their denial.

 

[Mikey C]

Bombardier's finances have been badly affected by the downturn in its aviation business, and the poor sales of its new and crucial C series jet. I imagine they need the cash!

 

[misterredmist]

If the merger goes ahead, I envisage bad news , Krefeld will become the main
build & assembly point........ I hope not of course....

 

[najaB]

Bombardier's finances have been badly affected by the downturn in its aviation business, and the poor sales of its new and crucial C series jet. I imagine they need the cash!

They've got something like 250 firm orders so I wouldn't call sales *that* bad. What's hurt them if anything is the fact that certification and deliveries fell behind where they were projected to be.

 

[MarkyT]

I thought Atkins had the Interlogic rump after Bombardier got rid of that a while ago

Thanks, I forgot that! Bombardier probably have very few UK based signal engineering staff today in that case. The old ML manufacturing plant in Plymouth is still active I think, so I'm sure there must be some project engineering capability remaining there. There is still a Bombardier office in Reading but it's only billed as an 'administrative office', and the only current job vacancies there are for rolling stock fleet support so I don't know if there are any signalling staff there.

 

[talltim]

If the air business is ailing, why not get rid of that?

 

[GRALISTAIR]

If the air business is ailing, why not get rid of that?

Because it is too sensible and logical

 

[najaB]

If the air business is ailing, why not get rid of that?

Because the book value of the outstanding C Series orders is something like $8 billion. Not sure how many train orders they have, but I'm guessing it's nowhere near that.

 

[LNW-GW Joint]

Because the book value of the outstanding C Series orders is something like $8 billion. Not sure how many train orders they have, but I'm guessing it's nowhere near that.

Similarly, Roll Royce has cash problems even though it has an order book of £76 billion!

 

[Mikey C]

They've got something like 250 firm orders so I wouldn't call sales *that* bad. What's hurt them if anything is the fact that certification and deliveries fell behind where they were projected to be.

It's poor when compared with rival projects, and Bombardier aren't experienced when it comes to launching all new planes.
Incidentally there are UK jobs at stake there as well, in Belfast

 

[Wavertreelad]

I can see EU competition issues although the introduction of Hitachi in Europe could damped any concerns provided they create a European product of some kind.

I don't believe Derby needs to worry. Siemens bailed out of Crossrail because it couldn't meet production requirements so perhaps there is enough work in the medium term for both.

I think the EU competition issue would kick in if the merged organisation had more the 34% of the European Market. With Hitachi entering the market and others perhaps trying as well the Commission would perhaps welcome a stronger EU based company rather than allowing the entire industry to be non EU owned and all the problems that would entail.