Siemens-Alstom mobility merger sends wrong signals to European Commission

The mobility businesses of Siemens and Alstom will no longer merge following the European Commission’s decision to block the move.

Siemens-Alstom merger
Alstom Avelia AGV (Pic: Alstom Transport/F.Susset)

Described by the companies in September 2017 as a Franco-German ‘merger of equals’, the combined entity aimed to be ‘a new European champion in the rail industry’ that could compete with ‘a dominant player in Asia [that] has changed global market dynamics’.

According to the EC, the merger has been blocked because the companies failed to adequately address concerns surrounding competition in markets for railway signalling systems and very high-speed trains.

If it had gone ahead the merger would have combined Siemens’ and Alstom’s transport equipment and service activities in a new company controlled by Siemens. It would have brought together the two largest suppliers of various types of railway and metro signalling systems, as well as of rolling stock in Europe.

Commissioner Margrethe Vestager, head of competition policy, said: “Millions of passengers across Europe rely every day on modern and safe trains. Siemens and Alstom are both champions in the rail industry. Without sufficient remedies, this merger would have resulted in higher prices for the signalling systems that keep passengers safe and for the next generations of very high-speed trains. The Commission prohibited the merger because the companies were not willing to address our serious competition concerns.”

The EC asserted that the deal would have removed a ‘very strong’ signalling systems competitor from several mainline and urban signalling markets. Similarly, for very high-speed rolling stock, the proposed transaction would have reduced the number of suppliers by removing one of the two largest manufacturers of this type of trains in the EEA.

Siemens and Alstom said their efforts to rectify these concerns ‘were extensive in scope and addressed all the concerns raised by the Commission with respect to signalling as well as very high-speed trains.’

In a statement, Siemens said: “In addition, a number of credible and well-established European players expressed strong interest in the remedy package, thereby fully confirming its viability.”

“On paper, this merger plan might need to address some important anti-competitive questions, but this out-and-out rejection by EU Commissioners is a serious overreaction,” commented Terence Watson, rail industry specialist at Vendigital. “The EU should be careful what it wishes for here. A strong and efficient Siemens-Alstom, operating within the rail sector, is a good thing for Europe. By rejecting this merger plan now, Europe could suffer consequences further down the line. For example, if Siemens or Alstom decides to review its European markets or scale back its product developments in Germany, Italy, France or the UK, then we could see industrial-scale reshaping and relocation. This could open the door to further competition from Asia, which would of course impact local jobs and national economies.

He added: “Rail markets today are quite healthy but that will not always be so, and these firms will pay the greatest price on a downturn. Even now, in the UK, the price of new trains is back at a level last seen in 2000 and this is placing considerable cost pressures on manufacturers and their supply chains. The situation is becoming increasingly unsustainable and businesses must grow scale or collaborate to survive.”