France slams EU veto of Alstom-Siemens rail merger

France’s government said Wednesday that the European Union's veto of a plan to merge French and German rail companies Alstom and Siemens into one industry giant was a mistake that would give China the edge on the world market.

A high-speed TGV train sits outside the Alstom plant in Belfort, France. Reuters/Jacky Naegelen

When it was announced last year, the merger was hailed as the birth of an industry giant analogous to European plane manufacturer Airbus that would compete with a formidable Chinese rival.

But following months of investigation and a failed concession offer by the companies, European Commissioner for Competition Margrethe Vestager rejected the merger, saying it would have created a near monopoly in the European market.

French Finance Minister Bruno Le Maire acknowledged a veto in the hours leading up to its announcement, calling it “an economic mistake” that “will serve the interests of China”.

France’s government had lobbied for the merger as a way to compete against China’s state-backed CRRC, with Le Maire saying before a meeting with Vestager last month that a merger was “the best response to China’s growing importance in the railway sector.”

Alstom builds France’s high speed TGV trains and Siemens builds the German counterparts, the ICE trains. Both companies also make rail signalling systems.

Vestager said the companies failed to address concerns of what the merged company would mean for the competetiveness of smaller groups. Competition authorities in Britain, the Netherlands, Belgium and Spain had all backed Vestager, out of concern for increased costs for their national railways.

France and Germany had urged Brussels to look beyond the EU and its member states and consider the rise of CRRC, which was itself born of a merger of Chinese companies, and said they would seek changes to EU competition policy.

“European competition rules need to be revised,” Le Maire said. “In the weeks to come, my German counterpart Peter Altmaier and I are going to make proposals aiming towards a much more ambitious industry policy.

“I hope we will consider that the pertinent market for analysing competition is the world market and not the European market.”

The proposed company was to create an industry giant with operations in 60 countries and an annual turnover estimated at 15.6 billion euros.

CRRC’s annual revenues of 26 billion euros outweigh France’s Alstom and Germany’s Seimens, as well as Canadian firm Bombardier, each of which brings in about eight billion euros a year.