Alstom, Siemens end ‘speed rail feud’ amid Asian onslaught

­­­­­­­­­­­Bloomberg

Alstom SA’s merger with the train-making arm of Siemens AG will mark the end of a bitter rivalry as the European rail industry’s biggest adversaries unite in an effort to
fend off the challenge from China and Japan.
The ill-tempered contest between Alstom and Siemens has been a feature of the sector for decades and reached boiling point in 2011, when the pair engaged in a public spat over the safety of competing high-speed models they were pitching to Channel Tunnel express operator Eurostar International Ltd.
Now the French and German companies are set to join forces in a business with 15 billion euros ($18 billion) in combined sales as they seek to halt the advance of Asian giants including Beijing-based CRRC Corp. and Hitachi Ltd. of Japan. That seemed a very distant prospect at the height of the confrontation over the 600 million-euro Channel Tunnel tender.
As the supplier of Eurostar’s original fleet, Alstom had seemed to be in prime position to win the order with a modified version of its iconic TGV. Instead, the deal went to the Siemens Velaro e320, prompting the French company to suggest that the multiple engines powering the German train would pose a serious fire risk in the confines of the 30-mile undersea tunnel.
Siemens emerged victorious after France accepted a ruling from the European Union’s rail-safety body saying the Velaro presented no more of a danger than the TGV. The defeat in its home nation came as a body blow to Alstom, which had been regarded as rail royalty since the original Train à Grande Vitesse snatched the world speed record from the Japanese Shinkansen in
the 1980s.
While the TGV was still the fastest railed vehicle after a 357.2 mile per hour run in 2007, the loss confirmed the pressure facing Alstom not just in the shape of Siemens but also from increasingly export-oriented Asian manufacturers and Canada’s Bombardier Inc., which had become the largest western train-maker following the 2001 purchase of Daimler AG’s Germany-based Adtranz arm.
The critical move in propelling
Alstom towards a tie-up with Siemens came with the sale of the French group’s power-generation business to General Electric Co. in 2015, according to Maria Leenen, chief executive officer of German rail consultancy SCI Verkehr.
While the French company gained GE’s signalling unit, giving it critical mass in one of the most profitable areas of rail technology, the transaction ultimately left it without the heft to fund expensive new train and engineering projects, Leenan told Bloomberg.
All the while, European train-makers were facing growing competition from China, where train output began to eclipse Bombardier, Alstom and Siemens from 2011. The threat was ratcheted up in 2015 when a government-led merger of China CNR Corp. and CSR Corp – created a new global No. 1 in CRRC.
The Chinese giant has yet to penetrate the most lucrative Western markets, but dominates sales to cost-sensitive economies in Africa, Eastern Europe, Latin America and Asia. CRRC can build a high-speed train for about 20mn euros, half the price of a European model.