Alstom to Scrap Belfort Plan After France Pledges New TGV Orders

  • Factory in east of country to maintain train manufacturing
  • State to take 15 more high-speed trains to protect 400 jobs

Alstom SA will maintain production and protect 400 jobs at its Belfort factory after the French government intervened in a plan to downsize the site with an order for new high-speed TGV trains.

The state will purchase an additional 15 TGVs on top of six already announced for railroad company SNCF, Industry Minister Christophe Sirugue told reporters in the town in eastern France on Tuesday. The company, about 20 percent owned by the state, agreed to invest 40 million euros ($45 million) in the plant for future train development and to diversify manufacturing as part of the deal, he said.

The move comes less than a month after Alstom unveiled the plan to halt production and engineering at the plant in Belfort due to a drop in orders. The decision was greeted with dismay by labor unions and politicians, who summoned Chief Executive Officer Henri Poupart-Lafarge to explain his motivations. The government’s move to prevent the closure could prove controversial after President Francois Hollande vowed to reduce France’s budget deficit.

“Thanks to dialogue with the minister, the government and local authorities, we managed to find new leads that give a long-term visibility to Belfort,” the CEO said. That “allows us to work more serenely on the diversification of the site, something that was difficult three weeks ago.”

The government has also confirmed orders for 30 intercity trains and 20 towing locomotives, Sirugue said. The intercity trains will be made in the Reichshoffen plant, 120 miles away from Belfort.

“I am satisfied with these public orders,” Belfort Mayor Damien Meslot told reporters. “The orders were necessary. We covered long and medium term.”

Creating a Shock

Meslot last week accused Poupart-Lafarge of “closing a historical site to create a shock and gain orders,” a charge denied by the CEO. The original plan included the relocation of locomotive manufacturing to Reichsoffen, leaving 80 staff at Belfort.

Alstom shares rose 0.1 percent to 23.62 euros as of 2:07 p.m. in Paris, valuing the company at 5.2 billion euros.

In 2003, France stepped in with an aid package to help support the ailing engineering company in one of Europe’s biggest-ever state bailouts. The injection of equity, loans and financial guarantees came at a time when other European engineering firms, including the U.K.’s Invensys Plc, had to renegotiate debts alone and sell assets to prevent collapse.

Before it's here, it's on the Bloomberg Terminal.