To leave François Hollande holding the full responsibility of Alstom planned decline is unfair. It is the result of more than twenty years of strategic mistakes made by its CEOs. But since, in 2004, Nicolas Sarkozy helped the group to avoid bankruptcy and gave it the possibility to rebound, the green light given by the state in 2014 to the deal settled with General Electric (GE), which was not asking for so much, has constituted a fatal mistake. Belfort closure, which is an emblematic site of the company where, during the past, were brought together activities related to transport and energy, carry the risk of being a new step toward the disappearance of this industrial jewel. And what a blow to the arguments given less than three years ago according to which transport activities could be developed alone and the sale of the energy business would not affect them. It is the opposite which occurred. Profits from other branches are not anymore there to cope with a temporary fall of orders in remaining activities .

All that mess started in 1988 with the disastrous decision to merge with GEC, whose main shareholder, Lord Weinstock, was only motivated by the size of his dividends. The sidelining of Alsthom emblematic CEO, Jean-Pierre Desgeorges and the appointment, to replace him, of an inspector of finance, Pierre Bilger, who had absolutely no operational experience, opened the way to a succession of mistakes. GEC-Alsthom, the merged company which had an ‘h” in its name, had a license agreement with GE to produce in Belfort gas turbines. Due to its expertise in aircraft engines, GE had an advantage on its competitors; but GE and GEC teams hated each others, because of their long-lasting rivalry. And the British, inside GEC-Alsthom, created such a hostile climate that GE denounced the license agreement and bought the gas turbines business located in Belfort, giving a bright future to this part of the industrial site. Incidentally, this shows that the arguments developed in 2014 explaining that it was not possible to separate the group energy activities, had no real basis.

To compensate this transfer, GEC-Alsthom bought the corresponding activities of the Swiss and Swedish group ABB, mainly located in Germany and in Switzerland. Previously, its parent company, Alcatel-Alsthom, had decided to sale its shares in its subsidiary, after taking a generous dividend, which impacted its cash. Unfortunately, the acquisition was a disaster because ABB gas turbines failed to meet their contractual requirements and the company had to pay huge penalties, without having the possibility to transfer them to the previous owner, which shows that the deal was poorly negotiated. But the worst was ahead. Shipbuilding business was confronted with a low level of activities. To hide it, the company faked its accounts in accounting as sales ship which had not been paid. It had provided to its clients the loans necessary to register the transactions. Banks discovered the hoax and stopped their financial support. The group was about to go into bankruptcy. At that time, the government had to intervene. Nicolas Sarkozy, during his short mandate as a minister of finances, got from the banks to reopen their credit lines and the state took a participation of 20%. Pierre Bilger resigned, but he had the elegance to refuse his financial package. This act is sufficiently exceptional, among our business leaders, to be noticed. Shipbuilding activities and the Saint-Nazaire site were sold to the Korean group STX, with the state keeping a participation of 33% in the capital. It was thought that with a new team at the head of the company, renamed Alstom, without its “h” and banks support, the group was out of danger.

Unfortunately, that was not going to last. After the rebound of the stock price in 2006, the state had the unfortunate idea to realize a capital gain and it sold its shares to Bouygues. Public works group interest was evident. It was looking for an easier access to contracts when Alstom would get orders for high-speed trains or for nuclear turbines. In the eighties, Bouygues had already, in competition with Alsthom, proposed to take a share in Framatome, now Areva. But the financial crisis occurred, with a slowing in orders and a stock fall. Bouygues would have to depreciate, in its balance sheet, the value of its acquisition. Pressures rose to increase the stock value, Alstom management proposed to GE, which did not want so much, to sell to it its whole energy business. In the past, GE went out of hydraulic turbines and had  a residual nuclear activity concentrated on the maintenance of the nuclear reactors it sold in the past to American utilities and to some other in Asia. Regarding renewable, Alstom was a marginal actor. The only thing GE was interested in was the gas turbine business since their position in Europe, despite the Belfort plant, was too small and Alstom proposal was a unique opportunity to increase it.

Jean-Marc Ayrault and Manuel Vals governments were too weak. They had given themselves the tools to partly block the transaction in introducing the obligation to submit to authorization foreign investments in strategic activities, among which were obviously nuclear activities. And they did not use this procedure. They surrender to Alstom CEO, Patrick Kron and even maybe Bouygues pressures, interested by the billions which will flow in the company, the rebound in the share value which will result and the possibility to distribute an exceptional dividend. But against all what was said at that time, Alstom financial structure has not been strengthened enough: a simple slowing of orders force the company to close a symbolic site because it cannot rely on the resources of the other branches to go through a difficult period. This situation will get more and more serious since the size of the company, compared with Siemens and its giant Chinese rivals, will be an insurmountable handicap in the future. And the fact that Bouygues has lend the state its shares, doesn’t change anything.

So, who are responsible for that setback? First, the successive Alstom CEOs, and, from the beginning, its shareholder, Alcatel-Alsthom. Then, the political leaders. If Nicolas Sarkozy, as a minister of finance was right,  his followers were wrong in selling the state participation, without getting sure that the company got a sufficient strength and had chosen right strategic options which could guarantee its future. Regarding current political leaders, they have been naïve or incompetent. In thinking they could build a competing proposal with Siemens, obviously impossible to achieve due to European rules, they lost their credibility. And in giving up to Patrick Kron pressures, when it was possible to build with GE a transaction limited to coal and gas turbines, they gave the demonstration they were unable to transfer in the reality their speeches about the “made in France”.