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AB 2000 studies

Alain Boublil Blog

 

General Electric and Alstom (continuation)

The announcement, the day after European elections of one thousand redundancies at Belfort site has generated indignation and acerb critics to the government. When the acquisition by General Electric of Alstom power businesses was approved by the State in 2015, it had been decided, on the opposite, jobs creations of about one thousand. Unable to fulfill this commitment, the American group was asked for a 50 million euro penalty by the State. But these announced jobs reductions are not concerning the activities acquired four years ago. They result from the major strategic mistakes made 25 years ago by Alsthom, whose name, at that time, included the letter “h” and from the inconsistent decisions in Europe regarding the energy policy. If a trial must be made against the State, this one must take into account the origins of the crisis affecting natural gas power sector, gennerating these redundancies, and Brussels incapacity to adopt the measures which will allow Paris Agreement commitments to be respected.

Alsthom has never been able to manage alone the conception and the production of natural gas power equipments. In France, the market was marginal, the country having chosen to have a large investment program in hydraulics and, of course, in nuclear power plants. Having the premonition that a new market could emerge, during the Eighties, Alsthom approached GE and acquired the necessary production licenses to produce and to sale in Europe and in some Asian countries these equipments. The American group then took a minority stake in the newly created entity. Its business was mainly located in the Belfort site, that one which is today in crisis. Alsthom made its first mistake at the beginning of the Nineties in merging with the British General Electric company, an historic competitor of GE. The new entity didn’t stop to upset the license agreement to the point that GE and Alstom which, during that period had lost its “h” letter in its name, had to divorce. The American company then became the unique shareholder of the Belfort site. During the following twenty five years, each time France was exporting gas turbines, whose we were very proud of it, it was these which were produced by GE at Belfort.  

Then, Alstom made another mistake. Being aware that the company could not stay absent in such a market, it acquired the corresponding business from its Swiss competitor, ABB whose main production facilities and research centers were in Switzerland and in Germany. Unfortunately, the transaction revealed itself a disaster on financial ground. The produced equipments did not deliver their expected performances and customers obtained penalties. That was driving Alstom toward failure. The State, under the impulsion of Nicolas Sarkozy, then minister of Finance, will take a minority stake, which reinsured the banks and which allowed the company revival. Once this one having recovered, the State stake was sold to Bouygues with a substantial gain.

Unfortunately, the recovery was short-lived and the management, supported by his main stakeholder, sold the whole energy business including maintenance and production, to GE. After this acquisition, the company disposed of two production tools for gas turbines, Belfort facilities and these which were acquired by Alstom from ABB. The first question to be risen is to know if redundancies are also considered for the Swiss and German units and if General Electric has or has not decided to privilege them against its Belfort site.

The reason put forward regarding these redundancies is the crisis which affects around the world the building of new gas power plants. It is, at least, a paradox. This sector, as all activities of production of capital goods, is by nature, cyclical. But its perspectives are rather encouraging. In the U.S. as in China, it is noticed a strong growth of natural gas share in the power mix. It is even that which has allowed the first one to reduce its CO2 emissions for five years and to China to stabilize its own ones. A gas power plant emits much less carbon dioxide than a coal one and very few small particles which are harmful for neighbor health as for these who are far away when the wind carries them. The international pressure in favor of the reduction of CO2 emissions as the economic good sense, because natural gas resources are huge, has generated and will generate in Asia and in other developing countries important investments. Unfortunately, and despite the declarations of political leaders in favor of climate, nothing like that is observed in Europe which is a market which could allow saving jobs in Belfort. Two CO2 emitters, among the most important in Europe, Germany and Poland, are continuing to exploit their coal and brown coal mines and to burn these fuels in their power plants when they should progressively close and replace them by natural gas power plants to fulfill the commitments they took.

A mechanism had been instituted by Brussels to incite enterprises, with the power utilities at the first row of them, to renounce to the most polluting techniques. CO2 quotas were allowed. Companies which had low level of emissions could resale their surplus to these who need them to fulfill the decided norms. Unfortunately, the quota allowances were too much generous. The quota value fell deeply which generates the disappearance of any incentive factor. Instead of making efforts to reduce their emissions, the enterprises could buy the resold quota at a low price by these which were the most virtuous. Even if the value of these quota rebounded for some months, during that period, France showed itself much too accommodating toward Berlin or Warsaw which actively opposed to any reduction of quota allowances in order to make their price rebounding, and to incite the major coal users to change their fossil fuel.

That would have softened difficulties for power plant equipments producers and, especially, that would have permitted the achievements of environment objectives. We can add the inflamed speeches in Europe, and especially in Germany where the Chancellor has just fixed as an objective “carbon neutrality” in 2050, about the end of fossil fuels, doesn’t contribute   guaranteeing employment among turbine producers, in Belfort as everywhere in Europe. Observed trends in the U.S. and China show that these talks have no credibility and are only used to protect coal utilization which is worrying for environment as for public health. The fact to maintain such a radical speech permits to avoid hurting questions. France silence, all the same so much involved in this quite justified battle, is more difficult to understand.

Belfort crisis results, in reality, from previous mistakes made by a company and from the State failures regarding industrial policy. It must be added the contradiction about energy transition. How is it possible to be surprised by the disappearance of a major industrial activity when nothing is done to allow to it to have markets and, especially, when it is proclaimed highly and strongly that, in the future, they won’t have any more clients?

      

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