Obstacles to Siemens-Alstom merger ‘too high’

MUNICH, Germany (AFP) – Concessions demanded by the European Commission to allow a planned tie-up of Siemens and Alstom’s rail operations are “insurmountable” and would likely block the plans, a Siemens source said yesterday.

“There will be no further concessions… we’ve run into a wall that is too high,” the source said, raising the prospect that plans to create a Franco-German rail giant to take on Chinese competition will fail.

Siemens’ fears for the future of the deal come after Alstom said early yesterday that there was “no certainty” the two companies’ proposals would mollify the Commission.

The French and German firms have offered to sell off some business activities and license other technologies, hoping to allay Commission fears the new combination could dominate the European market for rail signalling and high-speed trains.

Siemens is nevertheless adamant it will not give up its next-generation high-speed technology.

From the start, the Munich-based giant agreed to give up its older Velaro trains and offered some concessions on the second-generation Velaro Novo under pressure from Brussels.

But the firm balked at the Commission’s demand that it license a technology platform linked to its high-speed rolling stock, the Velaro3G System, the source inside the company said.

“On the one hand, we have the fear of competition from China. On the other, we have to offer a competitor 10 years’ exclusivity” on the technology, they complained.

“If the new entity were to give up the Velaro3G, they would be “completely shut out from high-speed train development in Europe for 10 years,” the source added.

Both Paris and Berlin have thrown their weight behind the proposed Siemens-Alstom tie-up.

But the Financial Times reported on Wednesday that Competition Commissioner Margarethe Vestager was unmoved by pleas from the two capitals, urging other members of the EU’s executive arm to stick to existing anti-trust rules.

The European Commission has until February 18 to deliver a decision on the merger.