Alstom: Why G.E. has a better chance to win

by / Wednesday, 07 May 2014 / Published in Smartgrid-CI Blog

Workers’ unions favor GE’s proposal: a major step forward for the U.S company.

It does not sound very nice for either of them but G.E should feel optimistic to be considered a more acceptable acquirer for Alstom’s energy business than Siemens; a choice the French workers’ unions recently expressed in their own way saying they would prefer “G.E’s plague” over “Siemens’ cholera.”

Why is this major step forward? Because President’s Hollande’s socialist government is about to implement a drastic cost cutting program worth €50B (about $70B) that is not very well received by part of his constituency that includes workers’ unions. It would be very careless of him to ignore their “preference” at a time when he needs as much political support as possible. Regarding case President Hollande’s official position is officially “neutral” but everyone knows he is extremely sensitive to anything related to saving jobs at least for the next three years. It may be just a coincidence but as a matter of fact the next presidential election is taking place in three years.

Compared to G.E’s, Siemens proposal is plagued by a few handicaps. On top of not benefitting from the worker’s unions preference, the German group’s business portfolio overlaps more with Alstom’s than G.E’s (at least in the union’s opinion). This overlap could become more problematic with the acquisition of Rolls Royce’s energy business announced today.

Today also, Siemens made even more major announcement; a radical overhaul of its organization that had remained almost untouched since the Karlheinz Kaske era in the early 1990’s; Siemens’ four big businesses (industry, energy, healthcare and infrastructure) will be abolished and the 16 divisions (inherited from the Kaske era) will be regrouped into nine. In other words, Siemens is getting rid of one decision level and regrouping its operations and this is not good for jobs.

It is never easy to acquire a company as big as Alstom in the middle of such a major restructuring; neither for the acquirer nor for the acquired.

Now, is G.E 100% sure of acquiring Alstom? Not so fast. Other issues may surface such as the French government’s overbidding that may end up making the acquisition less attractive. But ultimately the shareholders will decide and Bouygues who owns almost 30% of Alstom’s equity needs cash. And of course, supposed “anti-Americanism” has very little to do with this deal. Not liking Americans (or anyone else) has never been a reason for not doing business with them.

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