End Of The Line

EU blocks major rail merger

Image source: Route 66, philia - Shutterstock

What's going on?

European competition regulators blocked the long-awaited merger of Alstom and Siemens’ train manufacturing business on Wednesday – derailing plans to create a Franco-German rail giant.

What does this mean?

The deal was initially penned in 2017, with the aim of creating a single large European train company which could invest more in research and development – and simultaneously lower costs via “synergies”. But after months of investigation, Europe’s antitrust authorities concluded that the merger would result in less competition and lead to higher prices for consumers.


Late last year, both companies proposed selling off various bits in order to get the deal over the line. But, like a train on a leafy track, regulators were unmoved – ultimately banning the merger altogether.

Why should I care?

The bigger picture: Railways’ Airbus is air-bust.


Both the German (on behalf of Siemens) and French (Alstom) governments were on board with the deal – with the latter voicing its displeasure at the European Union’s decision. The hope was that the combined company, with some $17 billion of revenue, would be better placed to compete with Chinese rivals – much in the same way that European airplane manufacturer Airbus competes with the US’s Boeing. A key difference, perhaps, is that fierce competition between airlines helps keep ticket prices low even if the planes themselves are expensive. But rail routes often have a single main operator – whose effective monopoly (if only for a period) can result in high customer prices as it tries to recoup costs.



Zooming out: Driving isn’t an option either.


Elsewhere in Germany on Wednesday, Mercedes-maker Daimler’s results piled onto the bleak outlook for the auto industry this year as it cut its dividend and lowered its earnings forecast. Daimler wasn’t alone in disappointing investors, however: carmaker Toyota said in its Wednesday update that annual profit would be lower than expected thanks to falling North American sales. Perhaps people bought General Motors’ pickup trucks instead – and helped the company to a better-than-expected fourth-quarter profit.

Originally posted as part of the Finimize daily email.

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