It is all over the news and I must admit that I can’t help feeling a bit sad. Alstom, one of the biggest remaining industrial French companies, might be bought by General Electric. You could think that it is just another Corporate merger. Well, you would be wrong: we French believe that we are different, and as a result there is a last-minute twist in the plot: the French government isn’t pleased with the GE offer (I am unsure as to why, it all sounds like basic antiamericanism to me. Come on, let’s call a spade a spade, shall we?), and would like Siemens to make a counter offer, in order to create ‘a European champion’ -whatever this means-. They have even said that they would consider nationalising Alstom if need be. All of this might sound like it is happening very far from you, but, you see, as a young engineer, I used to work for Alstom. I was the project manager for the Rolling Stock of the Line 14 in Paris (Ah, memories!). In French, I would say that I have a pinching feeling in my heart (‘un pincement au coeur’). It is the end of an era. Yes, I must admit that I still love Alstom. Alstom is a matter of national pride. That said, things got a bit rough recently. Alstom was bleeding cash. Simply put, Alstom hasn’t restructured its business as it should to stay competitive. Things came to a head, and the only option was to find a buyer. And GE came.
I wouldn’t want to be a member of Alstom’s board right now. Basically, GE and Alstom have been talking for quite some time, and GE wants to buy the Power/Energy division of the French company. They have put a lot of cash on the table. To make matters even more complicated, one of Alstom’s main shareholders, Bouygues, badly needs to sell its participation to buy a telecommunication company. The French government disagrees with what it disingenuously calls ‘a shareholder’s approach’ -conveniently ignoring Alstom’s difficulties and massive overheads-. In theory, the government shouldn’t say anything, and shouldn’t interfere with private capital. In practice, our ministers are trying to revive a former offer from Siemens.
The thing is, if Siemens and Alstom were to merge, in the longer run there will be massive redundancy plans because the overlaps between both companies are simply everywhere, from the operational divisions to the headquarters. Siemens is a direct competitor in most markets. To top everything up, Siemens isn’t in that great a shape either (Can two companies in a difficult position make a healthy company? I am not so sure). Oh, and I am also convinced that the European antitrust laws would never allow for this merger to happen. So why is this debate happening at all?
I am worried for Alstom’s future, and for my former colleagues. The French government might manage to stop GE from buying Alstom. But where would it leave my former employer? Would it really save it? Well, quite the opposite: nobody will want to invest in Alstom. Alstom will become moribund, and it would be another blow to the ailing French economy. Foreign investments in France will drop too. In short, even if I can only follow what is happening from London, I fear that Alstom might become the latest victim of a misjudged French interventionism. I really hope to be proven wrong…