At the moment when we learnt that EDF and General Electric had started discussions about the buy-out of the production and the maintenance of the turbines equipping the nuclear power plants, which had been bought to Alstom six years earlier, was announced that the France trade deficit had reached a record with 84.7 billion euro. But no connection was made between the news. Yet the connection exists and it is essential. 2021 has been affected by a strong increase of the energy bill since the second half of the year, as a consequence of the geopolitical tensions which had impacted the fossil fuels prices. The sanitary crisis, with the many travel restrictions has hurt the aeronautic industry which was very positively contributing to the foreign exchanges. Airlines having a share of their fleets grounded had slowed the deliveries of the new airplanes they had ordered and have almost stopped to order others.

These two phenomena are for most of it responsible of the trade deficit increase in 2021. That wouldn’t have been worrying if it has been a temporary perturbation on a previous strong or even carrying a surplus, situation. But it was quite the opposite. For near twenty years and whatever is the economic situation we see a permanent degradation of French goods foreign trade which goes along with a de-industrialization and the destruction of hundreds of thousands jobs. To remedy to that, successive governments have put in place policies dedicated to the reduction of enterprises charges, thinking that it was mainly labor costs and high social charges which were at the origin this de-industrialization trend and of the persistence of the foreign trade deficit. No significant result has been registered. In return, that has worsened public deficits and it has been necessary, at least partly, to compensate that with household taxes increases.

It is in that context that Alstom has proceeded to the sale of its businesses in the energy sector. The time of the industry is a long one and so we have to go back long way to understand the causes of the persisting weakening of the French industry and of the appearance of a foreign trade deficit which is not stopping to increase and which affects France credibility inside the European Union and on the international scene.

At the origin, Alsthom, which included an “h” in its name and which was built through several mergers, is a subsidiary of the Compagnie générale d’Electricité”. The company has taken profit from two major choices made at the beginning of the Seventies and confirmed at the beginning of the Eighties, the nuclear program to which it delivers the power plants turbines and the High Speed Train for which it has designed and produced the trains. It has even taken over the Saint-Nazaire shipyard which, thanks to cruise boats orders revival, enjoys high growth prospects. Its name is now Alsthom-Atlantique. It has also concluded a partnership with General Electric to produce natural gas turbines it didn’t master the technology at that time. The American company has understood that the European market could become growing and has chosen the Belfort site where its French partner has at its disposal production capacities and indispensable industrial know-how.

But after the privatization of the CGE which had changed its name to become Alcatel-Alsthom, its new executives are going to commit a first strategic mistake through the merger of its subsidiary Alsthom-Atlantique with the British General Electric, an always rival of its American homonym. The company changes once more its name and becomes GEC-Alsthom. It breaks its relation with its former American partner which buys a part of the Belfort plants. Through doing that, it has lost its whole know-how in gas turbines at a time when the European markets start to grow.

The executives will then make a second strategic mistake through the acquisition, in this industrial area, of the Swiss company, ABB. But the negotiation has been poorly managed and the turbines which were under construction before the acquisition, revealed themselves unable to deliver the expected results which had been promised to the customers. That will generate heavy financial penalties and GEC-Alsthom will be near bankruptcy. The State will have to rescue it through its coming into its capital, a courageous decision taken by Nicolas Sarkozy as the Minister of Economy. The executives are replaced, the banks are reinsured and the enterprise changes again its name to now become Alstom.

But the consequences of that double strategic mistake will be heavy because Alstom was wrong two times in the choice of its partner. Neither GEC nor ABB could allow it to occupy a position of leader in the world market. Yet, in the global competition the choice of the right partner is decisive. Safran, whose name was SNECMA, would never have been able to become a leader in the jet engines production without its partnership with General Electric, concluded at the end of the Seventies and confirmed during the following years despite the pressures to change the partnership to the profit of Rolls Royce. The alliance was present in both sides of the Atlantic and so had a privileged access in the United States with Boeing and in Europe with Airbus. The reasoning was different about airplanes but quite also right. Airbus constitution, based on a partnership between the three main European constructors has allowed to occupying a top position on the world market and to rivaling with their American competitors.

Alstom has not been able to build the right partnerships. Its businesses in the energy sector have not delivered the expected results. The legal procedures about corruption launched in the U.S. then have been used as a pretext to proceed to their sale. But General Electric was only interested in reality by the strengthening of its position in Europe in the gas turbine business because it had stopped its activities in the production of hydraulic turbines. The company was active in the production of nuclear turbines but only to equip boiling water reactors which is a different technology from pressurized water reactors which were equipping the French power plants. In order to get the highest value in the transaction to the greatest profit of the new shareholder, Bouygues which had bought a part of the States shares, Alstom has demanded that General Electric buys the full portfolio of the energy businesses. The company executives whose payroll included a variable part taking into account the financial performances of the enterprise also benefited from the transaction.

The State could have been able to block the operation under the motive of the strategic character of the nuclear and hydraulic activities. It did not do it. The acquisition by GE has not delivered the expected results and has generated thousands of jobs suppressions and billion of missed exports. It must be hoped that the buy-out by EDF of the production and the maintenance of the turbines will allow to rebuilding a strategic industrial chain. That succession of mistakes has not been an isolated case. It is enough to analyze the Renault results or the reasons of the disappearance of Alcatel to be convinced of that.

The foreign trade surplus of the aeronautic industry is the result of the rightness of the strategic choices of the enterprises of this sector. The heavy trade deficits of the car industry as these of the industrial equipment sector illustrate, to the opposite, the failures of the strategies adopted by their executives and the best example of these failures is given by Alstom. To ignore the true causes of the de-industrialization, of the jobs losses and of the aggravation of the foreign trade deficit has then two consequences. The State abstains itself from intervening to correct these mistakes when they are done and it adopts policies which do not allow to delivering the sought-after objectives.