By Ben Dummett and Jacquie McNish 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (July 22, 2017).

Siemens AG and Bombardier Inc. are in advanced talks to combine their train-making businesses, according to people familiar with the matter, as they face stiffer competition from consolidating rivals in China.

Germany's Siemens, one of the world's biggest industrial conglomerates, and Canada's Bombardier, which is also a major plane maker, are discussing possibly creating two joint ventures from their train operations. One unit, controlled by Siemens, would hold the signaling operations of the two companies. The second, which Bombardier would majority own, would oversee the rolling-stock operations. Signaling equipment is used to keep trains clear of each other, and rolling stock centers on train manufacturing.

A spokesman for Siemens declined to comment.

The joint ventures would have combined annual sales of about EUR15 billion ($17.5 billion) based on 2016 results of both firms' train divisions, according to one person familiar with the discussions.

The companies expect to reach a deal in the next couple of weeks, though one person familiar with the negotiations said there are still some key issues that need to be resolved. As in all complex merger negotiations, talks could collapse without an agreement. The discussions were previously reported by Bloomberg.

The talks come at a time when the 2015 merger of Chinese train makers CSR Corp. and China CNR is forcing rivals to gain scale, which enables them to boost results by cutting costs and winning additional customers. In 2016, Bombardier's transportation business reported its revenue fell 9% from a year earlier to $7.57 billion. Earnings before interest and taxes, a profit measure, also fell. Siemens's train business has fared better, as its revenue and profit grew in the fiscal year ended Sept. 30. Still, orders fell 23% in the year.

Siemens is the leading supplier of train-signaling equipment, accounting for about 25% of the global market, compared with Bombardier's estimated 10% share, according to a recent report by the National Bank of Canada. The report said overlap between the two companies' rolling-stock businesses could "present some challenges" with competition authorities. The train-manufacturing arms of Bombardier and Siemens are both based in Germany, where the two rank as the country's largest suppliers, the report said.

Bombardier had signaled as far back as 2015 that it was considering a possible joint venture amid consolidation in the sector. At the same time, the company has stressed that it wouldn't sell the train business outright. Bombardier has long valued the train division as a counterbalance to its aerospace division. Train making tends to perform better during economic downturns, when governments increase spending on rail and other infrastructure projects, while demand for aircraft falters. The converse often holds during times of economic expansion.

--Christopher Alessi contributed to this article.

Write to Ben Dummett at ben.dummett@wsj.com and Jacquie McNish at Jacquie.McNish@wsj.com

(END) Dow Jones Newswires

July 22, 2017 02:47 ET (06:47 GMT)