Alstom, France in Talks Over Boosting Train Maker's Domestic Demand
September 13 2016 - 2:30PM
Dow Jones News
PARIS—Alstom SA has entered talks with the French government
over how to boost the train maker's domestic market after the firm
announced plans to shutter production of locomotives at a historic
plant.
The move places Alstom in the driver's seat as it presses the
government to revive domestic demand for the train maker and limit
competition from rivals in neighboring Germany and beyond. In
coming to the table, Alstom said Tuesday it had made no promises to
keep the plant operating.
"No decision will be made before (the talks) are finished," the
company said.
Last week Alstom sent shivers through France's political
establishment—just as the 2017 presidential campaigns are getting
underway—by saying domestic demand was too weak to sustain its
plant in Belfort, a French town near the border of Germany and
Switzerland that produced many of the country's first iconic
high-speed trains. Under the closure plan, Alstom intends to stop
producing trains at Belfort by 2018 and transfer the activities to
another site located in Reichshoffen, 200 kilometers north. Alstom
said the current level of orders for locomotives for freight and
high-speed trains made in Belfort doesn't justify keeping the
factory open.
On Tuesday, Alstom CEO Henri Poupart-Lafarge reiterated the
point in a letter to employees.
"We kept production in Belfort for as long as we could and for
as long as we hoped the activity loss was only temporary," Mr.
Poupart-Lafarge wrote. "Despite everybody's efforts it seems now it
is impossible to ensure future for the activities of the Belfort
site."
Prime Minister Manuel Valls rushed to contain the political
fallout, saying his government was working hard to find new orders
for Alstom's Belfort factory in France and in Italy.
The government will have to tread carefully in helping Alstom as
the European Commission prohibits direct or indirect state aid to
private companies.
The sprawling Belfort industrial site near the German and Swiss
borders has been regularly threatened by closure, making it a
battleground for politicians hoping to show they have a solution to
France's industrial decline.
This week President Francois Hollande publicly reminded the
company of the role his government had played in drumming up sales
for the firm in foreign markets, demanding the train-maker retrench
at home. He said Belfort should remain a hub for train-making and
keep its 470 workers employed.
Several of Mr. Hollande's rivals for reelection in 2017 have
built reputations as protectors of Alstom and the Belfort site,
which became a home for French train makers fleeing the
Alsace-Lorraine territory when it was annexed by Germany in
1871.
They include former economy minister Arnaud Montebourg, a
left-wing Socialist who led a high-profile battle in 2014 against
General Electric's ultimately successful bid for Alstom's
power-turbine activities. The French government still holds 20% of
voting rights in Alstom as part of the takeover deal.
Emmanuel Macron—Mr. Montebourg's replacement who resigned last
month to prepare his own run for president—last year visited
Belfort to pledge the government was striving to save jobs there.
And former President Nicolas Sarkozy, a conservative who is also in
the running in 2017, was finance minister when the government
rescued the company.
Two months ago, the French state-owned train operator SNCF
picked an Alstom rival, Germany-based Vossloh, to fill a EUR140
million ($157 million) order for 44 freight locomotives starting in
2018. Alstom was counting on getting that order to keep the
activity at Belfort going, a spokeswoman for the company said.
The train maker has pledged to find jobs for all the 470
employees at Belfort. A group of 80 workers will remain in the city
to service French trains, and the others will be offered work at
one of the company's 11 other sites in France.
Write to Inti Landauro at inti.landauro@wsj.com and Stacy
Meichtry at stacy.meichtry@wsj.com
(END) Dow Jones Newswires
September 13, 2016 14:15 ET (18:15 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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