Alstom and French government in talks over future of Belfort plant

September 13, 2016 7:31 AM EDT

A scale model high speed train and the logo of the Alstom are seen before the the news conference to present the company's full year to end-March 2015/16 annual results in Saint-Ouen, near Paris, France, May 11, 2016. REUTERS/Gonzalo Fuentes/File Photo

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By Julien Pretot and Emmanuel Jarry

PARIS (Reuters) - Alstom has begun crisis talks with the French government as President Francois Hollande tries to avert the engineering company's planned shutdown of manufacturing at its Belfort plant in eastern France.

The company, which makes France's high-speed TGV trains and is 20 percent controlled by the state, stirred up a political storm last week by announcing that it would stop making rolling stock at the site where its first steam locomotive was built in 1880.

The move comes seven months ahead of the presidential election, and under-pressure Hollande vowed that "everything will be done" to prevent the shutdown.

"Alstom confirms it is engaged in talks with the French government over the future of its Belfort site," a company statement said on Tuesday, adding that no decision will be taken before the talks are concluded.

The statement left the door open to negotiations after a note was emailed to staff at the weekend, in which Chief Executive Henri Poupart-Lafarge said that Alstom would go ahead with plans to end manufacturing at Belfort.

Prime Minister Manuel Valls had said that Alstom "should forget" any plan to close the site, with 400 jobs at stake.

With French unemployment sitting at about 10 percent and the presidential election looming in April, the deeply unpopular government could ill afford to ignore the move by a company viewed as a national industrial champion.


Alstom's Belfort announcement rekindles bad memories for Hollande of the Florange steel furnaces, which closed soon after he took office in 2012 and left many left-wing voters disillusioned by his leadership.

Transport Minister Alain Vidalies said on Tuesday that new orders would be made in the near future to ensure that the Belfort plant survives, putting pressure on state-owned railway company SNCF to secure a deal with Alstom over a train order for its Paris-Milan route.

Alstom's weekend note had cited a lack of orders and a need to streamline production.

"For over a decade, Alstom has received no locomotive orders in France and production of TGV locomotives, which is no longer assured beyond 2018, is at the lowest rate in its history," CEO Poupart-Lafarge said in the memo.

Belfort mayor Damien Meslot said on Tuesday that Poupart-Lafarge had told a meeting at the economy ministry that there were "margins for maneuver" over Belfort.

The government took control of a 20 percent voting stake in Alstom after the group sold its energy division to U.S. group General Electric (NYSE: GE).

It has until October 2017 to exercise an option to buy the actual stake from construction group Bouygues at a minimum 35 euros and secure its influence over the company.

But with the shares languishing around 24 euros it is more likely to wait until an eight-day window in October next year when it will be able to buy at market prices.

(Additional reporting by Leigh Thomas, Jean-Baptiste Vey, Gilles Guillaume and Benjamin Mallet; Writing by Michel Rose and Ingrid Melander; Editing by Pravin Char and David Goodman)

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