The proposed merger between the rail divisions of Siemens and French company Alstom has become a bone of contention between Germany and the European Union. Anxious to see it through, Germany’s economics minister, Peter Altmaier, is rumored to call the European Commission on a regular basis.
The fear in Berlin is that the EU’s trade commissioner, Margarethe Vestager, will call a halt to the merger on competition grounds. Just before Christmas, 18 European Union countries wrote jointly to the EU competition authorities, asking that mergers be considered in the context of global markets, not a narrow interpretation of domestic ones. The measure is thought to be aimed at China’s single-minded expansion into new territories, including Europe.
Ultimately, the future of European industrial policy is at stake. Siemens CEO Joe Kaeser recently spoke out in favor of the creation of “European champions” – large-scale, well-capitalized companies able to compete on global markets. He said they should be created even if the merged companies jointly have a huge market share within Europe.
The significance of Chinese competition became clear after a wave of high-tech takeovers in recent years. Critics points out that huge Chinese conglomerates are mostly state-owned or state-controlled, unlike their smaller European counterparts. Since EU competition authorities only look at European markets, they failed to spot the threat.
German business groups echo concerns surrounding China. In an unusually harshly-worded paper this week, the Federation of German Industry (BDI) demanded a tougher line on Beijing, saying there was a systematic struggle between liberal democracy and China’s authoritarian regime. The BDI also called for a harmonization of European merger policies.
Competition law is ‘obsolete’
There was support for the position late this week, when French prime minister Bruno Le Maire called European competition law “completely obsolete,” saying it prevents the formation of continental champions.
But Brussels was quick to hit back, saying it would not destroy competition law to build potential industrial champions. Oligarchic manipulation of any kind will only hurt consumers, the Commission added. With a market of 500 million consumers, claims EU Commissioner Vestager, Europe is big enough to need proper domestic competition.
Alstom and Siemens partly justify the merger as a way of fending off unfair competition from China. One of the merged company’s main competitors would be Chinese state-owned company CRRC, whose revenues are double those of Siemens’ and Alstom’s rail divisions combined.
The EU regards Chinese entry into the European rail market as “unlikely.” However, a study by consultants SCI Verkehr, seen by Handelsblatt, suggests the opposite. It claims that massive public investment in electric cars is pushing down revenue for Chinese rail companies.
In the years to come, sluggish markets and pressure on Chinese companies to diversify will quickly drive them into new overseas territories.
Dieter Fockenbrock is Handelsblatt's chief correspondent for the companies and markets desk, focusing on corporate governance, opinion and rail transport. Dana Heide is a political correspondent for Handelsblatt in Berlin. Till Hoppe is a Handelsblatt foreign affairs correspondent based in Berlin. Axel Höpner is head of the Handelsblatt office in Munich, focusing on Bavaria-based companies, including Allianz and Siemens. To contact the authors: [email protected], [email protected], [email protected], [email protected]