The EU has rejected a merger between rail giants Siemens Mobility and Alstom, citing "serious" effects on competition. The plan would have seen the creation of a European company to rival China’s CRRC.
The European Commission on Wednesday announced its decision to block a merger between Siemens Mobility and Alstoma – who produce the long-distance ICE and TGV trains respectively.
The Commission said the takeover, which would have fused the French and German rivals into a new company, breached anti-trust regulations because it "seriously reduced competition."
Read more: The Siemens-Alstom deal: A closer look
"This merger would have resulted in higher prices for the signaling systems that keep passengers safe and for the next generations of very high-speed trains," European Competition Commissioner Margrethe Vestager said.
"The Commission prohibited the merger because the companies were not willing to address our serious competition concerns."
Siemens, Le Maire criticize move
French Economy Minister Bruno Le Maire slammed the decision, calling for reform of the bloc's competition rules.
"It's sadly necessary to look to the future and reform European competition rules. Along with my German counterpart Peter Altmaier, we shall put forward propositions for reforming these rules and and creating a more ambitious European industrial policy," Le Maire said.
Veteran German politician Manfred Weber, who heads the biggest political grouping in the European Parliament, described the decision as "a mistake."
The Commission, whose responsibility it is to assess high-value mergers, began investigating the proposal last July. It says the two companies "were not willing to offer adequate remedies" to address its concerns.
Shortly after the announcement however, Siemens claimed it had proposed "extensive" remedies and regretted that these were insufficient.
Details of the now-defunct deal:
- Creation of a new Siemens-Alstom Group to be headquartered in France
- Alstom CEO Henri Poupart-Lafarge to head the entity
- Siemens to own 50 percent of shares
- Estimated annual turnover of €15.3 billion ($17.4 billion)
- Touted as "European Champion" to rival China's CRRC
The investigation’s findings
The Commission’s concerns were limited to two main areas: signaling systems and very high-speed trains. For other products in the rail industry, such as metros and most types of trains,it said there was enough competition for the Siemens-Alstom merger not to be a serious issue.
In the rail signaling systems market, Siemens and Alstom are two of the three largest players – the third also being a European company, according to Commissioner Vestager.
"To be clear: it’s fine to be big," she said. "But that’s not the issue here."
"The merged company would have become, by far, the largest player in Europe and in some signaling markets there would be no competition left."
As for the very high-speed trains market, which deals with trains with speeds exceeding 300 kilometers per hour (186 miles per hour), Siemens and Alstom are the two largest players globally outside China, Vestager said.
Chinese rail dominance
The investigation also addressed concerns Chinese rail behemoth CRRC, which holds about half the world market share, could push players out of Europe. But it found the likelihood of this happening slim.
"No Chinese supplier has ever participated in a signaling tender in Europe or delivered a single very high-speed train outside China," Vestager wrote. "There is no prospect of Chinese entry in the European market in the foreseeable future."
CRRC is a state-controlled corporation. It was formed in 2015 after a merger between the world’s two largest manufacturers of railway vehicles.
But the company’s success can be attributed to its virtual monopoly on rail car production in a country looking to rapidly expand rail infrastructure.
CRRC reported $33 billion (€29 billion) in sales last year. In comparison, Alstom had $9.4 billion and Siemens Mobility around $10 billion.
But Vestager says 90 percent of the CRRC’s activities are inside China, and it has "little success" overseas.
nn/msh (AP, AFP)