French Government to Buy Alstom High-Speed Trains
October 04 2016 - 9:57AM
Dow Jones News
By Inti Landauro and William Horobin
PARIS--President Francois Hollande's government Tuesday pledged
to buy high speed TGV trains from Alstom SA (ALO.FR) to halt the
company's plan to shutter production at Belfort, France's flagship
locomotive plant.
The order from the French state is loaded with political
significance just seven months ahead of presidential elections in
which Mr. Hollande's could face rivals also branding themselves as
saviors of Alstom and Belfort.
Mr. Hollande's intervention came after Alstom said in September
that weak demand and the loss of contracts to foreign rivals would
force it to stop production by 2018 at Belfort, the site where
France's first iconic TGV was built.
The plan to save the factory with direct orders paid out of
state coffers may face a serious hurdle if the European Commission
deems the plan to be irregular state aid. But failure to prevent
the closure of the storied plant--where French industrialists set
up after Germany annexed parts of Alsace and Lorraine in
1871--would have underscored France's industrial decline, striking
a blow to Mr. Hollande.
Mr. Hollande, who hasn't yet said if he will seek reelection, is
already struggling with a poor economic record. Unemployment has
risen steadily throughout his presidency and the latest figures
showed a jump in the number of job seekers over the summer.
"We chose to roll our sleeves up because we couldn't ignore the
call from the people of Belfort," industry minister Christophe
Sirugue said as he announced the plan Tuesday.
As part of the deal, the government said it would buy 15 TGV
directly from Alstom to run on a lower speed line in the south of
France. Normally, trains are ordered by state-owned rail operator
SNCF, rather than the French state, which has 20% of the voting
rights in Alstom. The European Commission didn't say whether the
plan breaks EU rules on state aid.
"We have seen the announcements regarding this issue. At this
stage, we have no information on the matter and cannot comment
further or speculate on any potential state aid issue," said
European Commission spokesman Ricardo Cardoso.
Announcing the deal, the French government also confirmed orders
for 30 smaller regional trains and said SNCF will buy six TGV for a
high-speed line linking France and Italy and 20 locomotives to
rescue broken down trains.
The orders for Alstom trains will help keep Belfort afloat in
the short term and give the company time to prepare for changes to
the European rail market, Mr. Sirugue said. In the long term, the
state and Alstom combined will invest as much as 70 million euros
($78.6 million) in Belfort in a variety of projects, including the
next generation of TGV and ramping up train servicing
activities.
Mr. Hollande's potential rivals in 2017 include his 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. Former
President Nicolas Sarkozy, a conservative who is also in the
running in 2017, has repeatedly claimed to have saved Alstom after
as was finance minister when the government bailed out the company
in 2004.
Christian Estrosi, a spokesman for Mr. Sarkozy's election
campaign, said the government's plan would only preserve Belfort
for two years.
"Mr. Hollande is proposing a band-aid for a wooden leg," Mr.
Estrosi said on radio station Europe 1.
--Natalia Drozdiak in Brussels contributed to this story.
Write to Inti Landauro at inti.landauro@wsj.com
(END) Dow Jones Newswires
October 04, 2016 09:42 ET (13:42 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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