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JR East to Form Rail Company to Take on Alstom, Siemens

East Japan Railway Co. (9020), the world’s largest listed train operator, plans to form a company this year to help coordinate domestic rail suppliers attempts to challenge Alstom SA (ALO) and Siemens AG for train projects overseas.

“We’re setting our sights on the world,” Masaki Ogata, JR East’s vice chairman for overseas affairs, said in an interview in Tokyo yesterday. “The organization will pull together all of Japan’s railway businesses.”

JR East aims to begin full operations of the company next year, offering packages for overseas projects that include trains, operations, signals and other parts, Ogata said. Japanese rail companies have supplied high-speed trains to Taiwan and the U.K., while companies from other countries built the infrastructure.

The planned company will be similar to Paris-based Systra, Ogata said. The French company, part-owned by rail operators Societe Nationale des Chemins de Fer Francais and Regie Autonome des Transports Parisiens, had sales of more than 250 million euros ($356 million) last year and has helped local suppliers including Alstom win projects in more than 150 countries since its formation in 1957.

JR East rose 0.2 percent to 4,505 yen as of the 3 p.m. close of trading in Tokyo, compared with a 0.2 percent decline in the Nikkei 225 Stock Average. The shares have dropped 15 percent this year.

$40 Billion

JR East has already allied with Kawasaki Heavy Industries Ltd. (7012) and other Japanese companies to bid for parts of a California high-speed rail project estimated to cost more than $40 billion. The nation’s rail companies are targeting overseas sales as a shrinking population stymies growth at home.

The Kawasaki Heavy-led group plans to bid for a contract to build both the railway and trains for the California high-speed line, Ogata said. The companies won’t bid on the civil- engineering project that will precede the railway work, he said.

JR East wants to advise on setting up the new train system in the state and may consider operating it, if asked, Ogata said. Systra, Alstom, Siemens and China Railway Construction Corp. are among the companies that have expressed interest in supplying the California project, according to the state-backed California High Speed Rail Authority’s website.

Civil engineering work on the new rail line is scheduled to begin next year, according to the authority’s website. The line will eventually link Los Angeles and San Francisco in 2 hours 40 minutes.

To contact the reporter on this story: Chris Cooper in Tokyo at ccooper1@bloomberg.net; Kiyotaka Matsuda in Tokyo at kmatsuda@bloomberg.net

To contact the editor responsible for this story: Neil Denslow at ndenslow@bloomberg.net

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