Why is EU Opposed to Alstom -Siemens Rail Merger?

Most African governments that are already thinking of relationship with a bigger giant in Alstom -Siemens merger are taken aback with the big hammer from Brussels. While will the European Union opposes a merger that can make for economic of scale and an improved EU tool in the international rail market? The possibility of an EU train leader may make a good possibility, many friends of the merger had thought.

The Chinese will be delighted at EU decision. Any stop to such merger is an great advantage to the Chinese CRCCG.

As usual, Brussels sets out objections to planned deal, saying it is ‘incompatible’ with the internal market. As analyzed by Politico, Franco-German ambitions for a European train champion to challenge China look increasingly likely to be derailed after Brussels set out a long string of objections to a merger between Siemens and Alstom. Brussels has reached a preliminary conclusion that the deal is “incompatible” with the internal market, according to two people who have seen the European Commission’s list of concerns about the merger, which the companies received at the end of last month.

The EU’s statement of objections — or formal charge sheet — makes clear that Brussels would have to block the tie-up unless the two rail companies offer significant remedies in core parts of their businesses across Europe, particularly regarding high-speed trains, signals and control systems, regional networks, and metro systems.The European Commission’s tough stance toward the creation of a “Railbus” — in the mold of aviation heavyweight Airbus —comes as a blow to German Chancellor Angela Merkel, who grumbled in June that EU competition law is holding Europe back in its attempt to forge global champions that could challenge their Chinese counterparts.

French Finance Minister Bruno Le Maire last month expressed confidence that the concerns raised by the Commission could be addressed,affirming “We want to build one of the most important world leaders in railway construction.” That hope appears misplaced.

EU Competition Commissioner Margrethe Vestager has been skeptical about the need for core EU industries to bulk up.The big concern in Brussels, however, is that the two companies will be so dominant in Europe after their merger that they will snuff out competition in the EU rail market, harming consumers. The fear is that there will be far less choice for national rail networks, leading to worse deals for everything from passenger fares to cargo fees.

She said that successful companies “will be the ones that are ready to compete under the bright lights of global competition; because they’ve been working at home in Europe to be more efficient, more innovative, better at serving their customers … So the champions Europe needs are not coddled favorites, freed from the need to compete within Europe.”

Some of the objections relate to specific national concerns, while others are pan-European. The investigation, as expressed in the statement of objections, reveals that the deal would harm competition in “a substantial part” of the EU, the people said.

Siemens Chief Executive Joe Kaeser is showing increasing signs of frustration with Brussels, and warned that Germany should be ready for the European project to unravel. “We also need a German position in the world” to prepare for a time when Europe might no longer function, Kaeser told a conference organized by Süddeutsche Zeitung Monday. “I am just saying we need a Plan B.”

But he also tweeted that European cooperation would still be the best model for Germany: “Europe needs a common trade policy to hold out with the greats in the world. But Germany needs a Plan B: ‘Germany first,’ however, doesn’t mean ‘Germany only.’”

Alstom and Siemens, as well as the third parties affected by the deal, may send their observations to the Commission’s preliminary conclusions before the end of this week.Alstom and Siemens remain “confident in the deal” and the companies are “committed to working intelligently with the Commission to get approval,” which they expect in the first half of 2019, a spokesperson for the Alstom-Siemens merger process said.

The main rationale for the merger is the emergence of a Franco-German European champion able to compete with China’s state-owned CRRC giant. The new European champion will have a combined turnover of €15bn, about half the market share of CRRC.

Alstom has just under 33,000 employees worldwide, just over the Siemens Mobility section of 29,000.The new company will be headquartered in France, which has a technological edge having developed the TVG high-speed train system. News of the merger in autumn 2017 was met with skepticism, with the French press opposing a majority stake by Siemens.

Siemens will own 50% of Alstom, gaining a 0,5% controlling stake over the next four years. The French government backs the Paris-based company and will be placing a major multi-billion Euro order for over 100-next generation TGV trains over the next three months.Alstom employs 32,800 people worldwide. Siemens Mobility has 28,800 staff members.

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