Alstom rescue plan agreed
In September 2003, following difficult negotiations, the European Commission approved a rescue plan for Alstom, the troubled engineering group, put together by the French authorities and banks. The plan adopted has not fully assuaged anxieties expressed by trade unions represented at the group.
Over summer 2003, despite a drastic restructuring plan endorsed in early July 2003 by the shareholders’ general meeting (FR0308101N and FR0306101N), the outlook for the Alstom engineering group again deteriorated, with order books showing a dramatic drop in demand. The management estimates that orders in the first quarter of 2003 were down 25% compared with the same period in 2002, blaming these poor figures on the poor international economic climate, especially in the energy production sector, as well as on uncertainties over the group’s future. Alstom's net losses for the first quarter of 2003 are estimated by management at EUR 500 million.
In late July 2003, Alstom’s chief executive, Patrick Kron, notified the authorities that the company would soon be filing for bankruptcy. Under the aegis of the Minister of the Economy and Finance, Francis Mer, a rescue plan was then drafted, involving the banks, Alstom's creditors and the French state. The latter committed itself to participating in a capital increase, to the tune of EUR 300 million, giving it a 31.5% holding in the company, with a banking consortium doing the same. This type of state intervention has been a longstanding practice in France and, in Alstom’s case, the government and public authorities had also been acting discreetly behind the scenes for several months to persuade certain state-owned companies to confirm their orders from Alstom.
In early September 2003, Mario Monti, the member of the European Commission responsible for competition issues opposed the initial Alstom rescue plan, on the grounds that it formalised structural assistance from the French state without EU scrutiny and was in contravention of the competition rules set out in the EU treaties. A second and more substantial rescue plan was subsequently drawn up - worth EUR 3.2 billion, compared with EUR 2.8 billion for the first plan - stipulating that the French state could become a shareholder in the company only if this was in compliance with the rules of the European single market, or did not constitute a state subsidy. The European Commission approved the plan on 22 September 2003, but its relevant departments are to carry out an enquiry to assess the rescue plan’s impact on the markets in question. The details of the revised rescue plan are set out in the table below.
|From French state||From banks||Total|
|Fixed-term conditional securities, repayable in shares||300||0||300|
|Bonds repayable in shares||0||900||900|
|Fixed-term conditional securities||200||0||200|
Source: Les Echos.
The restructuring plan already under way is to continue. The planned EUR 3 billion of divestments has been subject to some delay, but the sale of the Alstom transmission and distribution division to Areva should bring the sum brought in through divestments to EUR 2.5 billion by the end of 2003. Other assets are for sale, including the shipbuilding division (Chantiers de l’Atlantique). The plan presented to creditors makes allowances for a significant drop-off in orders and turnover for the next two years, before pinning its hopes on a recovery by the financial year ending in March 2006. However, a buy-out of Alstom’s main business activities by Siemens- which had already bought the medium-sized industrial turbines division - in order to make the German-based multinational a European leader in the transport and energy sector, has been discussed in European business circles.
Trade unions in the Alstom group’s various divisions and subsidiaries in France and elsewhere in Europe have expressed concerns. The European Works Council was due to meet on 7 October, and it has been rumoured that another job-cutting plan is in prospect - in addition to the one presented in the first quarter of 2003 - affecting 20% of the workforce of the transport division. The unions also fear that the sell-offs already completed and those now under way will be followed by more redundancies. The Office of Shipbuilding (Direction des constructions navales, DCN), part of the French Ministry of Defence, is regularly cited among the possible purchasers of Alstom’s shipbuilding division. The unions at Chantiers de l'Atlantique are anxious that, if there is such a takeover, there will be an accompanying round of job losses. Lastly, the interventions by the European Commission and Commissioner Monti have not always been interpreted by the unions at Alstom as expressing a firm commitment to maintaining employment levels and keeping the group afloat.