Behind GE’s Takeover of Alstom Energy

“Throughout most of American history, commercial interests have played a central role in foreign policy, and vice versa. During the next few decades the interaction between them will become more intense, more important, more difficult to manage … The second Clinton administration should lay out a framework for this interaction to provide the necessary guide for setting priorities …”

— Jeffrey Garten, Under Secretary of Commerce for International Trade 1993-95, ‘Business and Foreign Policy’, Foreign Affairs, May/June 1997

In late 2015, General Electric swallowed the energy division of the French multinational Alstom. The issue was highlighted mid-battle by Tom Gill on Counterpunch in May 2014.

Alstom had two prongs – energy (power and grid) and transport, with the former constituting over 70% of its business. The GE pr machine described it as ‘GE’s largest industrial deal ever’.

This is not your average takeover. Alstom’s trajectory incorporates larger dimensions.

It is a case study in the character of the peculiarities and vulnerability of the electric power and heavy engineering sectors – large-scale and extraordinarily complex output, irregular demand, and an inevitable close involvement with states as dominant purchasers.

It is a case study in the significant diminution of France’s industrial sector and of the deteriorating capacity of the French state.

It is a case study, by contrast, in the capacity of the US state and its strategic support of US corporate commercial interests.

It is a case study in the structural inhibition of the European Union’s institutions to ensuring European industrial vitality.

Chronology of the takeover

GE and Alstom senior personnel meet in Paris 9 February 2014. At head of GE is Jeffrey Immelt, at head of Alstom is Patrick Kron. The deal is cemented in secret in March and April. On 23 April, the day that finds Kron at GE’s Annual General Meeting, Bloomberg discloses the deal.

The French government is furious, not least Arnaud Montebourg, Minister for the Economy and Industrial Renewal (Redressement productif). GE, under pressure, makes a formal offer on 30 April. Montebourg elicits a counter offer from Siemens, which comes in (with Mitsubishi on board) with a joint venture offer on 16 June.

The Alstom Board approved the GE deal on 20 June, and the contracts signed the 21st. A last minute ‘compromise’ is effected.

Carbon-based gas and steam turbines are integrated directly into GE. These components represented €9 billion of the €14 billion turnover of Alstom Energy, employing 40,000 of its 65,000 employees.

In addition, three co-enterprises were created – Grid (Alstom) & Digital Energy (GE); hydro, offshore wind and marine energy; and nuclear (Alstom’s French turbines). Formally, they are joint ventures, but the control of all of them lies with GE. The French supply technical expertise. More, the prospect is that the co-enterprises will be absorbed by GE on its own terms in several years.

The state takes 20 per cent of Alstom, out of the 29 per cent shareholding of the construction giant Bouygues. There is conflict over the price to be paid, and the shareholding remains on loan as Bouygues wants top dollar. Formally a means to exert influence, it will be of zero consequence under GE’s management.

On 24 August Montebourg resigns/is pushed on the occasion of the establishment of a new austerity-focused Ministry under Prime Minister Manuel Valls. Montebourg is replaced by Emmanuel Macron, and the tinpot ‘industrial renewal’ sub-portfolio goes out the window. On 5 November Macron formally OKs the GE takeover.

On 19 December, at an Extraordinary General Meeting, Alstom shareholders approve the GE takeover, albeit with much hostility expressed. Nevertheless, Alstom’s Board awards Kron 150,000 shares, then worth €4 million, for his ‘exemplary’ stewardship of the takeover. The Board also awards itself an extra €300,000 in remuneration (on top of the existing €1 million) for the ‘extra work’ involved.

At the same time as GE was pursuing Alstom, so also was the US Department of Justice (DoJ). On 13 April 2013 Alstom senior manager Frederic Pierucci (sometime head of Alstom US) was arrested at JKF airport and held in high security. He would spend 14 months in jail, having been abandoned by his employer. Pierucci is to be the lead fall guy for a DoJ investigation into Alstom bribery for an infrastructure contract in Indonesia.

On 27 March 2014 Bloomberg announces that the DoJ has extended its Alstom investigation to other countries involving suspected bribery.  On 23 April (the same day that the deal is being forged) Alstom’s former Vice-President Asia, David Rothschild, is arrested in the American Virgin Islands, and imprisoned for several months.

On 22 December The DoJ imposes a $772 million fine on Alstom. The early hope within Alstom, sold to all and sundry, was that GE would pick up the tab. The DoJ thought otherwise.

The GE takeover required ratification from Brussels, concerned about competition on the European landscape, particularly in gas turbines. Belatedly on 8 September 2015 Brussels confirms the GE takeover, subject to concession of some of Alstom assets to the lesser Italian firm Ansaldo Energia. On 26 February 2016 the takeover is finally consummated, with Ansaldo Energia garnering some choice morsels of Alstom’s intellectual property.

The initial GE offer was of €12.35 billion. For that, GE readily picked up €1.9 billion of Alstom’s cash reserves. Alstom had to fork out €2.6 billion for its share of the three co-enterprises over which it has no control. GE unilaterally deducts another €300 million from the price because of the drawn out deliberations by Brussels. After paying off debt, the DoJ fine, Alstom shareholders were left with something less than €3.7 billion.

From whence comes Alstom?

Alstom’s complex trajectory is representative of the evolution of late 19th Century technology-dependent corporations providing what would become essential national infrastructure. The story in brief.

The American General Electric company is formed from a merger of Thomson-Houston and Edison in 1892. GE immediately implants an affiliate in France in 1893, the Compagnie Française Thomson-Houston (CFTH).

In 1928, Alsthom (Als-thom) is formed from components of CFTH (later Thomson) and the Société alsacienne de constructions mécaniques (SACM, 1872), forging a combination of electronic and metallic expertise. Ironically, Alsthom is a step-child of GE, profiting in its early years from the use of GE patents. SACM bequeaths to Alsthom an iconic Belfort factory (where its first steam locomotive was produced in 1880).

Alsthom’s national significance was established in the early years of post-War reconstruction. Its equipment supplied nationalized electricity infrastructure (EDF) and a nationalized rail network (SNCF). It was an important cog in France’s particular post-War ‘long boom’.

From the start, Alsthom has exhibited a peculiar duality. On the one hand, via internal innovation and via myriad alliances and takeovers, Alsthom has enjoyed the most extraordinary technological success. Alsthom’s diesel locomotives have been sold worldwide. Its development of the Very Fast Train (TGV) for SNCF is legendary. The EDF’s nuclear power plants depend heavily on Alstom’s steam turbines, including the advanced Arabelle design. Alsthom’s equipment for hydroelectric power generation has been seminal. It has committed research to pollution-reducing infrastructure.

The vulnerability of Alstom

On the other hand, Alsthom has been perennially financially vulnerable. This vulnerabity arises from a combination of historical turbulence, the intrinsic nature of the industry/ies, periods of bad management, and difficulties in obtaining capital backing appropriate for its product lines.

In these sectors, companies are faced with the necessity to make strategic takeovers or alliances to avoid cyclicality of earnings and to build scale. But those moves are fraught with potential danger. Thus did Thomson hand over control of Alsthom to competitor CGE (Compagnie générale d’électricité, 1898) in 1969; after several years of successful joint ventures between the rivals.

CGE was nationalized and de-nationalized during the Mitterand 1980s. Following de-nationalization, CGE moved to internationalize Alsthom’s activities. In 1988 CGE initiated a 50-50 merger between Alsthom and GEC Power (the British General Electric Co, 1886, no relation). The desired scale is enhanced, with better leverage against Siemens in mind. By the early 1990s, Alsthom was a world leader in its specialties. In 1991 CGE is re-named Alcatel-Alsthom to transcend confusion with GE and GEC.

But in 1995, CEO Pierre Suard was indicted on several counts and forced to resign (the charges were dismissed over a decade later). Suard was replaced by one Serge Tchuruk, with no background in Alsthom’s arenas.  Tchuruk divests Alcatel-Alsthom of multiple companies and competences and orients its budget towards telecommunications, losing billions of euros.

Alsthom becomes a deprived child and privatized on several exchanges in 1998 and after, not before Tchuruk cleans out its treasury. In this process, the ‘h’ is dropped, catering to anglo pronunciation.

Suard, permanently bitter, accused Tchuruk (who resigns, well remunerated, in 2006) in April 2015 of having destroyed €24 billion from Alcatel-Alsthom assets over 12 years and 100,000 jobs.

Simultaneously the cross-channel fusion of Alsthom with GEC had become a conflicted mixed marriage. There was simmering a longer dissonance. GEC had declined to adhere to a previous Alsthom/GE market sharing agreement whereby Alsthom manufactured gas turbines at Belfort under license, GEC intruding into GE’s overseas territory. This conflict led to the Belfort large gas turbine plant being sold to GE in 1999, a significant loss to Alstom.

In the backwash, Alstom seeks to formalise a growing partnership with Swiss-Swedish Asea Brown Boveri regarding energy assets (particularly to recover its place in gas turbine markets), soon acquiring ABB’s share. The takeover is a disaster. The equipment, norms and cultures are chalk and cheese. ABB equipment failure leads to repair bills, demand for damages from customers and a subsequent loss of orders. Alstom writes off billions of euros and acquires significant debt. Bank lenders take fright. Alstom calls in the French state in 2003 to rescue it, which requires agreement from Brussels. Brussels allows the state’s entrance into Alstom’s capital but at the cost of Alstom divesting itself of more assets (shipbuilding and electricity grid), with thousands of its workforce retrenched.

The French state’s shares (under pressure from Brussels) are sold to the Bouygues construction group in 2006, which becomes Alstom’s dominant shareholder (29.4 per cent). This shareholding was in turn a mis-match. The Bouygues shareholding, with the company having other priorities in 2014, was ripe to be readily gifted to GE when the time came.

Remarkably, Alstom recovered from 2004 through to 2009, its good health reflected in key indicators – the order book, turnover, net profit, cash flow – which led to a solid rise in the share price. Alstom engages in new hirings of skilled staff, in enhanced R&D, and in new acquisitions and strategic alliances. In particular, in conjunction with Schneider Electric, it buys back the grid division that it had sold to Areva in 2004. The good times are symbolized by Alstom’s V150 TGV loco achieving a record rail speed on 3 April 2007 of 574.8 km/h.

Alas, late 2008 brought the GFC. Alstom management hopes for a ready recovery, but it doesn’t arrive. Europe, especially France, is permanently in the doldrums. Internationally, home grown national champions arrive to enhance the temperature of global competition in Alstom’s fields. Thousands of Alstom employees are retrenched in 2010 and 2011. During these bad times, Alstom continues to pay out dividends, feeding the now ravenous short-termism and seemingly detached trajectory of the French bourse.

This is bad timing for the ‘good news’ history of Alstom, Mw & Km/h, produced in coffee table picture book style, commissioned in happier times. The book finishes on an optimistic note: “The future is not a smooth freeway. But when one has already, like Alstom, scaled some Everests, one is capable of negotiating the ups and downs of the obstacles that present themselves. Only one option: never give in. This is the spirit of Alstom.” The spirit of Alstom would soon be deflated by forces both without and within. Like Alstom itself, Mw & Km/h has come to be remaindered.

How GE (and the American state) does business

It is salutary that the US Department of Justice’s pursuit of Alstom ran parallel to GE’s pursuit of Alstom. Alstom’s Kron denies that the issue was a factor in his desire to sell to GE, although it was let about that GE would pick up the tab.

Certainly, Alstom had got into the habit of handing out the baksheesh, indifferent to the long term implications. We know that corruption is endemic in business, facilitated by the black box that is the joint-stock corporation. Neglected, however, is that the character of the sectors in which Alstom has been involved impels the players forcibly into money under the table – rare to irregular prospects, huge sums involved, layered access to the state apparatus, do or die.

So are the Americans above all this smelly stuff? The Americans are merely better at it, with a broader range of options, courtesy of the US’ hegemonic status.

The aggressive use of the intelligence services for commercial leverage was revved up in 1992 under Bush senior. Bill Clinton took it up immediately upon taking office. Jeffrey Garten (as above) and James Woolsey, Clinton’s first CIA Director until forced from office, were at the centre of what Garten rightly called economic warfare. Garten need not have worried that his leaving office would lessen the enthusiasm. Thus Clinton’s February 1995 A National Security Strategy of Engagement and Enlargements declaims:

“The collection and analysis of intelligence related to economic development will play an increasingly important role in helping policy makers understand economic trends. That collection and analysis can help level the economic playing field by identifying threats to U.S. companies from foreign intelligence services and unfair trading practices.”

The US is past master at ‘unfair trading practices’. This is the country that undermined GATT (the institution conceived in optimism in 1947, supposed to break the global propensity for protectionism) from day 1, taking agriculture and later textiles out of the equation. In other domains try the Jones Act and the Surface Transportation Assistance Act (which incorporates the Buy American Act). Etc.

In 1988 British researcher Duncan Campbell uncovered and exposed the existence of the US-UK initiated ECHELON intelligence-gathering system. Upon invitation from the European Parliament, Campbell produced a report titled Interception Capabilities 2000 (IC2000) in April 1999. The report was published in French in 2001 as Surveillance électronique planétaire. There we read:

“In 1970, according to its former Executive Director, the US Foreign Intelligence Advisory Board recommended that “henceforth economic intelligence be considered a function of the national security, enjoying a priority equivalent to diplomatic, military, technological intelligence”. On 5 May 1977, a meeting between NSA, CIA and the Department of Commerce authorised the creation of secret new department, the “Office of Intelligence Liaison”. Its task was to handle “foreign intelligence” of interest to the Department of Commerce. Its standing orders show that it was authorised to receive and handle SCI intelligence – Comint and Sigint from NSA. The creation of this office thus provided a formal mechanism whereby NSA data could be used to support commercial and economic interests. After this system was highlighted in a British TV programme in 1993, its name was changed to the ‘Office of Executive Support’. Also in 1993, President Clinton extended US intelligence support to commercial organisations by creating a new National Economic Council, paralleling the National Security Council. The nature of this intelligence support has been widely reported.”

In early 2001 Campbell followed up his 1999 IC2000 with ICIE2001 papers 1 & 2. In paper 2 (‘Comint impact on international trade’) we read:

“By July 1994, CIA director Woolsey was asserting that ‘several billion dollars a year in contracts are saved for American business by our conducting that type of intelligence collection. We intend to continue to do it. It is relatively new. We are very – frankly – very good at it, and we have had some very positive effects on contracts for American businesses.’ …

“By the end of the 1990s, the U.S. administration claimed that intelligence activity against foreign companies had gained the U.S. nearly $150 billion in exports.

“Although U.S. intelligence officials and spokespeople have admitted using Comint against European companies, this admission has been limited to occasions on which it is alleged that European contractors have offered or paid bribes. However, examination of U.S. policy developments indicates that such intelligence collection is much more broadly focussed, and can include ‘subsidies, government-to-government lobbying, schemes to promote exports and restrain imports, unwritten agreements, strange financial links and unusual commercial deals’. The definition of corrupt or ‘unfair’ practices is not limited to illegality, but includes any occasion on which American companies believe that their products are better and cheaper than their competitors and should have been purchased by the overseas buyer. Other documents show that the CIA has been directly involved in obtaining competitor intelligence for business purposes.”

The booty for US companies is listed in a complementary 2001 Campbell document labelled ‘Selected U.S. Advocacy Center “Success Story” claims, 1993-2000’.

With reference to the state-GE partnership, in particular, Leslie Varenne and Eric Denécé note:

“Besides, the politicians themselves don’t hesitate to do the hard work for their national companies on international markets. In her last book, Hard Choices, Hillary Clinton discloses that, as Secretary of State, in October 2012, she has lobbied for GE with Algerian President Abdelaziz Bouteflika. The result? A 2.5 billion dollar contract.”

The Algerian contract was for gas turbines (to be manufactured in the US, not France), with Siemens being the then top-ranked loser. Clinton also flogged GE in China, a key Alstom market.

Jean-Michel Quatrepoint highlights that, during the DoJ pursuit of Alstom, GE itself had in its employ around thirty former DoJ functionaries. The Wall Street Journal reported in February 2015 that GE had seen all the documentation regarding DoJ litigation against Alstom. What a coincidence! With all this legal muscle and insider knowledge, no-one in GE sought to disabuse Alstom heavies that the latter’s hope that the DoJ would cease its pursuit or that GE would pay a DoJ-inflicted penalty wasn’t going to happen.

Quatrepoint also notes that at least five companies known to be pursued by the DoJ have been snapped up by GE – Invision (US, 2004), Ionics (US, 2005), Amersham (UK, 2004), Nycomed (Norway, 2004) and Vetco Gray (UK, 2007). GE was well primed to pick up Alstom.

Moreover, GE was readily able to come up with the do-re-mi for the Alstom purchase because of its huge tax-evading cache offshore, courtesy of official tolerance. GE’s CEO since 2001, Jeffrey Immelt, pursued tax evasion as a specialist arm of GE’s activities. Quatrepoint notes that the relevant division of GE, under a former US Treasury specialist (what a coincidence!), employed around 950 staff. Quatrepoint also notes that, by end of 2012, GE had accumulated $108 billion offshore. Between 2002 and 2011, GE generated $80 billion in gross profits, but paid only $1.4 billion to the US exchequer. Taxes paid in other countries were negligible.

The French state

The French state engaged in major nationalizations and consolidations post-World War II (courtesy of the Conseil Nationale de la Résistance) and after François Mitterand’s election in 1981. The post-war developments resulted in key public infrastructure, such as the Société nationale des chemins de fer français (SNCF), Electricité de France (EDF) and Gaz de France. The Mitterand experiment, blanket in coverage and ultimately short-lived, was heartily opposed by some French industrialists and has received almost universal obloquy in anglo commentary. But it appears that the Mitterand nationalizations did generate some efficiencies (c/f Vivien Schmidt’s 1996 From State to Market).

But France has jettisoned its perennial flirtation with dirigisme and gone down the neoliberal path – the incapacity post-GFC is glaring. This evolution has been given a peculiarly French twist with the degradation of the public purpose of the elite écoles and their ‘output’ via pervasive non-meritocratic nepotism and large-scale revolving door-ism (pantouflage) of publically-educated public servants into investment banks, law firms, consultancies, etc. In particular, the Finance Ministry, pivotal to good governance, is treated as a stepping stone to personal advancement.

Alstom CEO Patrick Kron is representative of the new breed. CEO/Chairman since 2003, Kron set about hiring a new breed of managers – pro neoliberalism, contempt for the state, with no concept of the national interest. Yet Alstom, by the nature of its business, has as its major customers state-owned instrumentalities and has been the ongoing beneficiary in its overseas sales with receipt of export credits. It’s a one-way process for Kron’s generation.

Representative of revolving door-ism is David Azéma, then head of the Agence des participations de l’État (responsibility for managing state shareholdings), who decided to quit APE in mid 2014 at the height of the imbroglio over Alstom’s future. Azéma departed for Bank of America Merrill Lynch London so that he could evade the state’s (puny) constraints on revolving door-ism. Azéma’s remarks: “Why am I leaving the state? To earn more money.” Thus the stampede.

So also Emmanuel Macron. Product of the École nationale d’administration (an énarque), he joins the Finance Ministry, then becomes co-author of the neoliberal Attali report on regenerating the French economy, then to Rothschild, then joins the Hollande Presidential election team, then into Hollande’s office in the Élysée, then into the Economy Ministry following Montebourg’s departure in 2014.

With Montebourg feverishly trying to find means to save Alstom Energy from GE’s clutches, Macron (as Élysée apparatchik) lectures the former: “A private enterprise on which one imposes terms – that’s not on, save in Venezuela.”

Macron’s crowning achievement in office was the omnibus and opaque Loi Macron, oriented to deregulating everything that moves, thus fiercely resisted by the vox populi. But his signature tune was the bizarre privatisation of the Toulouse-Blagnac airport (down the road from Airbus HQ) to a Chinese consortium located in a tax haven. L’état, ce n’est certainement pas moi.

It is not irrelevant that Macron was designated as a ‘Young Leader’ as part of the crop of 2012 inaugurated into the French-American Foundation. What? The FAF was founded in 1976 during the US bicentennial – France gives the US the Statue of Liberty and the US gives France a Trojan Horse! The FAF introduced the ‘Young Leader’ program in 1981. Hollande himself was ‘chosen’ in 1996, even Montebourg in 2000 (along with myriad other Ministers in Hollande’s and previous governments).

Soft power at work. Thus the US pincer strategy – gunboat diplomacy (NATO, Foreign Corrupt Practices Act, sanctions, etc.) and soft power. De Gaulle in his grave, Gaullism quasi-extinct, the French are now easy prey.

GE has itself mopped up some of these pantoufleurs in their new roles to help push the bid for Alstom before French authorities. GE even pushed the idea that GE is more French than Alstom. Fronting GE’s French thrust was the well-connected Clara Gaymard, GE France’s CEO (another énarque). GE and Gaymard are both active in the French-American Foundation, with Gaymard on its Board. (Gaymard has since left GE after the embarrassment of GE not keeping its promises on employment retention in France.)

No better reflection of France’s abject subjugation is in its kowtowing to the American agenda through the latter’s unilaterally determined sanctions regime. France’s cancellation mid-stream of the project of building two Mistral class ships for Russia will cost it in the order of €2 billion. The impact of the loss of agricultural exports to Russia remains to be evaluated.

Add another significant and under-publicized example – the French auto industry, already struggling post-GFC. This issue has got one François Asselineau (fierce anti-‘Atlanticist’, with his miniscule party, Union Populaire Républicaine) very hot under the collar. Asselineau notes the disastrous impact of the entry of GM (then under partial government ownership) into Peugeot’s register in February 2012. Peugeot is subject to an immediate demand to pull out of Iran, location of its largest export market. In July, Peugeot announces the forthcoming retrenchment of 8000 workers and the planned closure of its plant in Aulnay, suburban Paris. Renault is also pressured and succumbs to the same threats. Asselineau queries – high treason or idiocy? They complement each other.

Understanding how the game is played

It is distressing to confront how little ‘the rules of the game’ are understood – by the subject decision-makers themselves and especially by the ‘expert’ commentators.

Academics are generally incapacitated by virtue of their imprisonment in artificial silos called ‘disciplines’. How to analyze the symbiotic relationship of state and capital? First one has to recognize it, and that it exists elsewhere than in those odd ‘authoritarian’ countries that break ‘the rules’ (viz. previously Japan, Singapore, now China). Impossible within the silos.

A sub-genre specialization plays with an appetizingly labelled ‘Varieties of Capitalism’ idea. Well intentioned indeed, but its output is replete with banalities at best and rubbish at worst. Not least in its characterization of US capitalism, the heart of the beast. Budding students, do not go there.

By default, telling it how it is has been left to journalists who suffer no such artificial strictures and look to understand the big picture. Thus has Jean-Michel Quatrepoint written Alstom: scandale d’État, the definitive account of the story. Even then, it takes a courageous journalist to do the hard yards, as the mainstream media (now mostly owned by billionaires and administered by their flunkies) has been consigning such ‘big picture’ writers to the margins. They complement the handful of research centre-based ‘big picture’ academics like Jacques Sapir and Frédéric Lordon who are constrained to write for dissident media.

Economics is the worst of the ‘silo’ disciplines, with meaningless parlor games as its forte. Thus respectable French economists join with the celebrities who clog the respectable media outlets in advising both the authorities and the untutored public that the malaise in France is to be remedied merely by deregulating the ‘over-regulated’ labour market and reforming the burdensome welfare state. One might think that already dramatic deregulation of labour rights in the workplace and the handing over of billions of euros to employers might have given French industry renewed buoyancy. But no. The unemployment figures refuse to relent. And the strictures of the experts remain the same.

Thus has the respectable crowd in France replicated the hoary old chestnuts that are standard fare in the anglo financial media regarding the French ‘malaise’.

The New York Times’ Roger Cohen has reinforced over the years the correct line for the NYT’s would-be enlightened readers. He has lived in Europe for decades, and he is still steeped in his nativist stereotypes. This in September 2014:

“More than any other party of the center-left in Europe, the French socialists have had trouble jettisoning ideological baggage ill-adapted to 21st-century global competition. More than any other Western country, France has resisted modernity, at least in the way it thinks of itself. So my feeling listening to Valls talk about ”effectiveness” could be summed up in two words: Good luck! The prime minister is up against something deeper than the resistance of labor unions or his own party: a culture that views the prizing of efficiency as almost vulgar.”

France has a problem, but it’s not what the anglo-centric The Economist or Financial Times or Roger Cohen thinks it is. France’s problem is that its current elites and its pundits haven’t grasped how multi-state global capitalism works. Its ancestors understood it, practised it (often badly), but the current breed has lost the plot. US soft power, rampant personal opportunism, the inbuilt strictures of the European Union, the omnipresence of the English language per se, has addled their brains.

The French elite has imbibed the eulogized Anglo-Saxon model, but it has incorporated it only partially. It has internalized the ideology as much as the real thing.

It has absorbed its dysfunctional destructive elements – notably, an omnipresent financial sector that is incompetent, predatory and/or oriented to short-termism. Thus have the French authorities coddled as de facto ‘national champions’, with no quid pro quo whatsoever, the dysfunctional key players in the banking sector that gave Europe its own GFC.

The current French elite has not accommodated how the American (and British) ‘Anglo-Saxon’ models work in practice.

The British state, with the Empire long gone, is fundamentally oriented to ensuring the global pre-eminence and profitability of the City of London, and, as a side plate, the support of its military-industrial-intelligence complex.

For the US, from its inception, state and capital have been brothers . Manifest Destiny has been rooted in the worship of the Holy Dollar.

Thus did the French authorities not see the crushing power of the GE pursuit of Alstom Energy. They still don’t.


Brussels is also part of the problem. Brussels’ economic policy apparatus is structured on the European Central Bank and on Maastricht. Both are repressive. These institutions have been publicly defended on the erroneous presumption that their underlying principles were the source of Germany’s rise as an industrial and economic powerhouse. Joke. Brussels has no positive mechanisms to support industrial development and revitalisation.

A sometime notion of breaking down national boundaries and fostering intra-European mergers to forge ‘European champions’ has now been supplanted by the overarching principle that competitive markets must prevail. European champions like Airbus/EADS have now been rendered impossible by Brussels’ assertive competition authority and its refusal to countenance state-led strategies of industrial development and national responses to economic and industrial crises. Inter-EU national rivalries complement Brussels’ animosity. Thus the paralysis of Europe since the GFC.

Although this mentality in Brussels might have been premised on the ambition to prevent the abuse of market power and corruption (it hasn’t), nation states are hampered in maintaining effectively their national infrastructure, for much of which publicly-owned natural monopolies are appropriate, and in forging a revitalisation of key firms that provide products essential to the national interest.

Some of Alstom’s problems can be readily slated home to management’s hubris, but a company vital to the national interest should not be allowed to be subject to the vicissitudes of management incompetence and market turbulence. Brussels’ intervention over the terms of the French state’s capital injection in 2004 in Alstom was misconstrued and destructive, further weakening Alstom’s ability to recover.

Brussels has further weakened Alstom by subservience to and aggressive oversight of US-directed sanctions against Russia.

The takeover’s significance

Quatrepoint and others tell a sombre story. It is just the latest liquidation of a flagship of French industry. And will not be the last. It is a scandal. And it is an indictment of the French political, bureaucratic and business elite.

Some losses are significant and irrecoverable. Alstom’s considerable technology and patents are lost to the national domain.

GE announced in January 2016 that it would retrench 6,500 Alstom jobs in Europe, 760 in France. GE had promised the Government that it would ultimately create 1,000 jobs in France, but that’s pie in the sky.

The past interlinked skilled workforce of Alstom and state-owned instrumentalities is fractured. Skills and workplace cultures cannot be dismantled and readily reconstructed if the need arises. Only academic economists believe in malleable capital and labour. The panoply of subcontractors lose business and possibly the business itself. Nobody in authority cares about the input-output matrix or the potential knife edge between virtuous industrial circles (sustainable) and vicious circles (downwards to oblivion). These concepts are not taught, and rarely grasped by those in authority. The past is a foreign country. In particular, the considerable public and civic investment in Belfort, regenerated following the ABB disaster with the vision of reinforcing a local ‘energy valley cluster’, has been devalorized in the takeover.

Key dimensions of the French national interest are now under GE control. Supply and maintenance of key components of nuclear power plants are now in GE’s hands. Defence interests itself are compromised with GE’s role in the provisioning of the nuclear component in France’s maritime forces. Alstom’s subsidiary Satellite Tracking Systems, based in Grenoble, has been of crucial significance in French security interests. Satellite Tracking has provided infrastructure and expertise to French military intelligence directly and to key defence contractor Thales.

The Alstom Transport remnant

Alstom has now been reduced to Alstom Transport – vulnerable, with thin capitalisation. Alstom has a tolerable order book for the next several years, but nothing from within France. In September Alstom announced a €2 billion contract for a Washington-Boston TGV setup. Good if it transpires but, courtesy of local protectionism (as above), production will take place in the US.

In early 2016, the capital-strapped SNCF ceded 50% of Akiem, its locomotive procuring subsidiary, to a Deutsche Bank fund. Lo and behold, Akiem awards a locomotive contract to Bombardier in June and another one in July to the German Vossloh – the latter for production at a new site in Germany. The contract that went to Vossloh could have kept the Belfort site in business for several more years.

In early September, Alstom Transport’s CEO, Henri Poupart-Lafarge, announced that it would close the Belfort plant at the end of 2018 and move the totality of production to another Alstom site in Reichshoffen, in the north-east corner of France. The Belfort site has experienced a long decline – from 1400 workers in 1990, 630 in 2013, now reduced to 480.

The government had taken no interest in the future of Alstom Transport, not least with the useless anti-statist Macron at the Economy Ministry (fortunately he resigned in August). Coming from behind in the face of protests, the Government stepped in in early October with a multi-faceted rescue package.

The very expensive package includes a proposed order for 15 high speed trainsets for future use on the Bordeaux-Marseille routes whose infrastructure is not ‘up to speed’. The government, forestalling ridicule, claims that the proposed order is ‘in anticipation of the future completion of the Bordeaux – Toulouse and Perpignan – Montpellier high speed lines’. The weekly Le Canard Enchaîné calls the logic more electoralist than industrial or economic.

Fade to a longstanding project on the drawing board in the same vein – a TGV line between Poitiers and Limoges. It was first proposed by Prime Minister Raffarin in 2004 (his fiefdom a ‘beneficiary’). Long simmering, it was knocked down by the Cour des comptes in October 2014 (huge expense for minimum benefit, indeed downsides). President Hollande (as for Raffarin) resurrected the idea in January 2015. It was knocked down again by the Conseil d’État in April 2016. Hollande resurrected it again in visiting his fiefdom this October.

The high speed trainsets order for non-existent infrastructure and the phantom Poitiers-Limoges TGV line are quintessentially representative of the parlous state of what currently constitutes ‘industry policy’ in France.

The big numbers in France don’t add up, and the immediate prospect is no better. The sticky 10 per cent unemployment rate (and that’s merely the official rate). The drag on tax revenue (and on social welfare budgets) wrought by unemployment, enhanced by ongoing de-industrialization. The complementary drag on tax revenue due to pervasive tax evasion of corporations and individuals. The consequent budget deficit that is never going to meet Brussels’ Maastricht handcuffs. The entrenched deficit on current account. Add the certain deleterious impact of the cancerous Canada-EU free trade agreement (CETA), pending.

Much angst has been generated by the claimed existential threat to the European ‘project’ of Brexit. The most significant current threat to the European Union comes from France itself, at the heart of the animal. Brussels doesn’t see it, doesn’t care, because the structures on which the EU were built and remodelled are sacrosanct. Brussels’ own rampant revolving door-ism highlights that, contrary to the rhetoric, nobody in charge of the show has their eye on the long term.

If the current trajectory of France continues, it’s ultimately goodbye to the European Union. And not before time.


Jean-Michel Quatrepoint, Alstom, Scandale d’État: dernière liquidation de l’industrie française, Fayard, August 2015.

Jean-Michel Quatrepoint, ‘Des missionaires aux mercenaires’, Le Monde Diplomatique, November 2016.

Leslie Varenne & Eric Denécé, Racket Americain et Démission d’État : le dessous des cartes du rachat d’Alstom par General Electric, Centre Français de Recherche sur la Renseignement, December 2014.

Françoise Nieto, Mw & Km/h: une histoire d’Alstom, Coop Breizh, 2010.

Evan Jones is a retired political economist from the University of Sydney. He can be reached