Rhein on Energy and Climate

The offer by General Electric to take over Alstom or parts of it, one of the three European manufacturers of electric power equipment, has raised protests from the French government. Happening simultaneously with a Chinese participation in Peugeot-Citroen, it shows the precarious state of French and European manufacturing industries.

It is therefore not surprising for the French government to have blocked the merger until alternative solutions are being considered. To that end, it has “invited” Siemens, the global number Two in power equipment, to make also an offer. Siemens might be interested in taking over the power business and transferring its high speed railway manufacturing to Alstom, which would correspond to their relative strengths and enhance their global competitiveness, what matters.

Those in favour General Electric`s Alstom acquisition stress the obstacles a Siemens deal might face under EU competition law. This is not correct: any take-over of this dimension will have to be scrutinised by the EU Commission for compatibility with the internal market.

However, it is no longer the domestic but the global market share that matters for such scrutiny; and globally the combined General Electric/Alstom power equipment sales would exceed those of Siemens/Alstom by 20 per cent.

In a global economy the EU market is becoming largely irrelevant for the intensity of competition. This applies in particular to power equipment, where the European market is too small to sustain several players. To reach the necessary scale for research and development they must successfully compete in the world market.

Whatever the outcome of the deal, which the three companies will have to decide, the EU Commission should learn to privilege industrial over competition policy and create the environment in which “global champions” can emerge.

An Alstom-Siemens merger would correspond perfectly to the sense of Article 173 TFEU which calls on the Union and member states to create the necessary conditions for a competitive industry. Has the EU Commission really done enough for this?

Eberhard Rhein, Brussels, 29/4/2014

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