IT TAKES ONLY a minute or so for a conductor to couple two trains headed in the same direction. Merging their manufacturers is a trickier process. Siemens and Alstom, big, old engineering firms from Germany and France respectively, have been trying to gain regulatory approval to join their railway operations since September 2017. Seemingly to no avail: European competition authorities are poised to block the deal next month.
The prospect of creating a European rail giant has pitted politicians against trustbusters. Competition authorities fret the combined group would dominate some bits of the rail business, such as making train carriages or track signals. The competition bods at the European Commission, in charge of clearing big mergers, have been sending ever-clearer signals that they will give a red light to Siemens-Alstom on February 18th, when the decision is due.
Yet politicians continue to be enthusiastic proponents of the deal—and are making their views known. Peter Altmaier, the German economy minister, argues that such mega-mergers are necessary for European groups to compete globally. France’s finance minister, Bruno Le Maire, tried to sway the European competition commissioner, Margrethe Vestager, this week.
The elephant in the carriage is the transformation of China from a large-scale buyer of such industrial kit to a potent exporter. The Alstom-Siemens merger was designed in large part to take on CRRC of China, a giant state-backed rail group with global ambitions. Advocates of the merger say the mere existence of CRRC is a reason to think Siemens-Alstom will face hefty competition. The trustbusters note that the Chinese firm has made few inroads into Europe, at least for now.
More broadly, the politicians think the technocrats are forcing European firms to stick to rules no one else is adhering to. In the age of increasing protectionism, they accuse Europe of being naive in its dealings with America or China, which don’t hesitate to gorge their own firms with soft loans or otherwise make life hard for foreign competitors. This echoes the firms’ thinking: Joe Kaeser, the boss of Siemens, argued this week that competition authorities needed to look into “global social economic factors” to make a decision.
Analysts at Citi, an investment bank, say the market is pricing in a less than 10% chance Siemens-Alstom will come into being. The putative merger partners could yet make the deal more palatable to Ms Vestager by promising more concessions, for example the divestment of assets or licensing their technologies to rivals, though time is running out. For its part, Siemens says it has made as many concessions as it can stomach. If the deal falls through, it may spin off its rail operations into a stand-alone business, perhaps giving it a separate stockmarket listing.
There is a slim chance politicians will manage to derail the technocratic process. No explicit threats or promises have been made yet, but Ms Vestager is sometimes touted as a new head of the European Commission later this year, a position for which German and French support would come in handy. More immediately, she will need her 27 fellow European commissioners to approve whatever decision her staff arrives at. This is usually a formality, but lobbying for the deal—and against Ms Vestager’s dogged adherence to the rules-based system—will go on until the last minute.
This post was originally posted at https://www.economist.com/business/2019/01/26/the-creation-of-a-european-rail-champion-is-headed-for-the-buffers.