Chinese competition no ‘excuse’ for Siemens-Alstom rail tie-up
Rival Hitachi says companies are winning contracts but as yet pose little threat in Europe
European trainmakers Siemens and Alstom should not be allowed to use competition from Chinese companies as an “excuse” for their merger, the head of one of their rivals has said.
Alistair Dormer, chief executive of Hitachi’s global rail business, said Chinese trainmakers were winning contracts around the world but had not properly entered the European market: “I think using the Chinese as the excuse to merge Siemens and Alstom is a bit premature.”
Mr Dormer added: “If you say, well, they’re never going to come to Europe, then I think you’re wrong. I think it’s a matter of time, not if. But I don’t see Chinese manufacturers building factories all over Europe.”
The proposed merger of the rail operations of Germany’s Siemens and France’s Alstom has been looking shakier after the groups said on Wednesday they would not offer any further concessions to the European Commission, which is on the verge of blocking the deal. Several national competition authorities — including in Germany — have raised serious objections.
EU competition commissioner Margrethe Vestager has also rejected arguments from Siemens and Alstom that the merger is necessary to fend off competition from China’s CRRC.
Hitachi Rail, which moved its global headquarters to London in 2014, has a factory in the north-east of England employing 730 people and has contracts to build almost 200 trains for the UK.
If the Siemens-Alstom merger went ahead, Hitachi could stand to benefit from any divestments the companies had to make, but would face a much larger competitor. The companies combined would have €15.3bn in revenues and operating profits of €1.2bn, while Hitachi Rail is forecasting revenues of ¥630bn (€5bn) this year with adjusted operating margin of 7 per cent.
Mr Dormer, who was speaking ahead of announcing Hitachi’s intention to explore bringing battery-powered trains to the UK, said a no-deal Brexit would not be an instant challenge for his UK factory since it had largely local supply chains, but if there were no resolution for months, “I would hope that there will be a lot of people shouting very, very loudly”.
He also said that adopting World Trade Organization tariffs following a no-deal Brexit would “put the UK at a disadvantage” for its exports and would cause Hitachi to revisit its medium-term plans for assigning production between sites in the UK and Europe.
Hitachi delivered its first fleet of trains that use both battery and electricity in Japan last year, with batteries that could run for 60 miles on a 10-minute charge — technology Mr Dormer said would improve following developments in the automotive sector. He predicted there would be no more diesel trains on the UK’s railway network by the 2030s.