In France, all the main roads lead to Paris and if you are a foreign investor seeking to buy a French company, every strategic avenue leads to the Elsyee palace. The French state does not control Alstom SA, the country's publicly traded flagship engineering firm which is being courted by America's General Electric Co. and Germany's Siemens AG. Alstom makes TGV high-speed trains and power generating equipment and today, President Francois Hollande is receiving supplicants from the opposing sides: this morning Jeffrey Immelt, the chief executive of GE and this evening the President will greet representatives of Siemens. Later the President will meet representatives from Bouygues SA, the French contractor which owns 29 per cent of Alstom and is keen to sell.
Even if the French president was minded to stay out of this titanic corporate struggle, he could not hide. The French trade unions are already calling for a nationalization of Alstom to protect jobs while Marine le Pen, leader of the extreme right National Front, accused the government of abandoning Alstom to the profit of Americans or Germans. Jean-Francois Cope, leader of the main opposition UMP party, accused the socialist government of behaving like a "pyromaniac fireman" while Arnaud de Montebourg, the economy minister gave warning that the government would secure its vested interests in Alstom: "GE and Alstom have their calendar, which is that of shareholders, but the French government has its own, which is that of economic sovereignty."
Siemens emerged over the weekend as a spoiler to GE's $13-billion (U.S.) bid approach. The German engineering giant is seeking to tempt Alstom with a solution more politically palatable and more distinctly European than the absorption of Alstom's power generation business into an American monolith. Under the Siemens' proposal, there would be an asset swap in which Siemens acquired Alstom's power business and in return, Siemens would transfer its high-speed rail business to Alstom. The Siemens offer would create two European champions – one in fast trains, the other in thermal and renewable energy. You might think that the German proposal would easily trump the Yankee bid, but the politics are more complex than that.
Ten years ago, Alstom was on the verge of bankruptcy and Siemens was waiting in the wings to pounce as a vulture bidder, intent on dismembering the corpse of French industiral engineering. Nicolas Sarkozy, then minister of finance, did a shuttle to the Brussels competition commissioner, then Mario Monti, seeking approval for a rescue bail-out of France's industrial champion. The deal was done, Siemens was rebuffed and the French state took a fifth share of Alstom which was subsequently sold to Bouygues. But the legacy has left Patrick Kron, Alstom's chief executive with little love for Siemens and the latter's enduing desire to eliminate Alstom as a competitor in the power turbines market. Meanwhile, GE has established a large business in France with 11,000 employees and has been careful to cultivate good relations, appointing as its president in France, Clara Gaymard, the wife of Herve Gaymard, a former French economy minister and currently deputy leader of the UMP party.
There is no question that the outcome of the struggle for control of Alstom will be a political decision and even Bouygues, the contractor hoping to sell it 29 per cent shareholding knows that its stake won't swing the deal. Whichever corporate colossus owns Alstom will ultimately face the French state in every direction whether in the form of SNCF, the French railway company and principal customer for TGV trains, or in the form of EDF, the state-controlled power utility and buyer of electrical equipment.
For the privilege of consolidating Alstom's power equipment business into an even bigger engineering giant, both Siemens and GE will be expected to pay a price and it is that cost – in guaranteed jobs and political patronage – that will be discussed today in the Elysee palace.