Alstom Highlights Perceptions of Transatlantic Investment

Alors qu’Européens et Américains négocient un traité de libre échange transatlantique, l’affaire Alstom montre que le dirigisme économique joue encore un rôle dans les relations entre Etats, écrit Guillaume Xavier-Bender, dans un commentaire pour le German Marshall Fund.

In today’s transatlantic economy, is there still room for dirigisme and industrial sovereignty ? As discussions progress on the Transatlantic Trade and Investment Partnership (TTIP), the recent Alstom-GE-Siemens case provides food for thought on how willing Americans and Europeans are to create a truly open transatlantic marketplace. It seems that sovereign sensitivities will continue to play a role in foreign investment decisions.

On April 30, Jeff Immelt, CEO of GE, appeared on French national television to explain why his company wanted to take control of the energy arm of Alstom, one of French industry’s leading and historic flagships — a "crown jewel" as described by The New York Times. Immelt reassured the French people that GE would remain "a good investor" in France, as it had always been, and that it indeed intended to create jobs throughout the country. Earlier in the day, Alstom had formally indicated that it would explore GE’s €12.35 million offer for its energy activities, while remaining open to other potential investors for a month.

Alstom’s energy arm represents 75 percent of its global revenues. So when the story leaked on April 23 that GE and Alstom were finalizing details of a deal, the government in Paris reacted swiftly, waving the flag of strategic interests and economic sovereignty. Pushed by the French, the German industrial group Siemens updated an offer it had already made earlier in the year to acquire Alstom’s energy arm in exchange for parts of its own transport activities, an option openly favored both by Paris and Berlin. On April 27, French President François Hollande received GE’s and Siemens’ CEOs to express his concerns and to listen to the guarantees that both groups would bring in order to protect jobs in France, as well as the country’s nuclear industry.

So far, this seemed to be a standard case of dirigisme. But while uncertainties remain over the government’s actual legal capacity to veto the deal, President Hollande confirmed on May 5 that "the offer is not enough so it is not acceptable." Laying out a number of conditions that would need to be met by GE (some of which echo Siemens’ competing offer) in a letter to Immelt, French Minister of Economy Arnaud Montebourg explained that the government "wishes to examine the ways and means of a balanced partnership, rejecting a pure and simple acquisition that would lead to the demise of Alstom." Dirigisme became economic patriotism.

In February, Hollande attempted to charm foreign investors by proclaiming that France was "open for business." Indeed, with a slow and staggered economic recovery, the country could benefit from more foreign participation in creating wealth. But as the Alstom case illustrates, the French government is not yet willing to blindly accept foreign investors taking control of what are considered strategic interests. Beyond concerns over France’s energy security lies a much greater motivation that is increasingly understood across Europe as the true source of wealth : jobs. Value, in this regard, originates from employment. And employment is conceivably an integral part of national economic security.

What is happening in France is instructive. It provides a number of lessons for the future of the transatlantic economy, and more immediately to the U.S. and European negotiators who will gather in Washington in late May.

Much time is still needed before the potential for transatlantic industrial champions is recognized in the same way that enthusiasm for two potential European industrial champions is demonstrated by backing a deal between Alstom and Siemens. In addition, European governments, although lacking legal frameworks or institutions similar to the Committee on Foreign Investments in the United States (CFIUS), intend to defend what they consider to be strategic economic interests. France is not an isolated case. The British government is facing a similar situation with Pfizer’s bid to acquire biopharmaceutical group AstraZeneca, with possible impacts on local employment.

Such renewed dirigisme in Europe could be assimilated to a growing European consciousness to the challenges of economic security. During the current economic and societal transformations, it will take time for the potential benefits of restructuring national industrial champions to be recognized and accepted.

In this regard, the Alstom-GE-Siemens story reaches far beyond its business and economic implications. It confirms that when trying to strengthen the transatlantic economy, the road is still long to curb lingering misperceptions and mistrust. Do U.S. investors really put more jobs at risk in Europe than European investors ? Beyond trade relations, these apprehensions are likely to derive from the core nature of foreign direct investments and their very local implications. When it comes to TTIP, the "I" may actually be more contentious than the "T."