“The best is the enemy of the good.”- Voltaire
France and the U.S.-based General Electric Co. have become unlikely business pals.
On June 23, after a nearly two month’s battle, the French government and GE both declared victory in the company’s takeover bid for part of a French company, Alstom.
Neither the company nor the socialist French government wanted to enter into a business partnership. But after protracted negotiations, both sides recognized the wisdom of compromise: GE would pay $13.5 billion for Alstom’s power-and-grid business, and Alstom would become a 50-50 partner with GE in its nuclear steam turbine business.
To mollify French opposition, the government bought a 20 percent stake in Alstom from its leading shareholder, Bouygues. This assures the government’s control of politically sensitive technologies, such as turbines for nuclear plants and bullet trains.
GE chairman and CEO Jeff Inmelt said: “The alliance will retain and strengthen France’s presence in the energy business and reinforce Alstom Transport. It creates jobs, establishes headquarters and decision-making in France. “
The tie-up between Alstom and GE was not the first choice of President Francois Hollande. French officials had attempted to derail that bid by encouraging a merger with the giant German company Siemens.
Hollande in January had outlined his plans for stimulating France’s anemic economy. He wanted to recreate the success of Airbus — a conglomerate that evolved out of linkups among French, German, British and Spanish aerospace contractors.
“We are very proud of the legacy of Airbus,” Hollande said. He called for “a grand Franco-German company for our energy transition, a beautiful alliance.”
But Hollande’s goals were not attuned to present-day realities. Recent attempts to promote consolidations in other industries such as telecommunications have been thwarted by EU regulators. Instead of creating behemoths, regulators now prefer to foster competition and to lower consumer prices.
Siemens was reluctant to acquire all of Alstom. Reportedly, it only wanted to buy Alstom’s gas-turbine assets. The Wall Street Journal quoted an unidentified source who was more blunt, saying, “Siemens’ primary goal was to simply sour any Alstom deal with GE.”
The French government needed to develop a backup plan after it failed to broker a marriage between Alstom and Siemens. Its solution was to become Alstom’s largest shareholder. Thus, instead of a grand Franco-German company, the French government went into business with GE and became a direct competitor of the German firm.
German officials are incensed by the French acceptance of the GE-Alstom deal. Peter Ramsauer, chairman of the German parliament’s economics committee and a key ally of Chancellor Angela Merkel, said: “France is conducting ice-cold national industrial policy and has put unilateral French interests ahead of European interests.”
In defending its actions, the French government said its intervention safeguards thousands of jobs as well as Alstom’s French identity. “This is a big political, economic and, above all, industrial victory,” said a spokeswoman for Economy Minister Arnaud Montebourg, who spearheaded the government’s strategy. “We haven’t given up on the creation of European champions in either energy or transport.”
Alstom chief executive, Patrick Kron supported the deal with GE, saying in an interview at one of his company’s factories that, “This is a good project. I believe in it, and I wish to focus on seeing it through.”
Voltaire would be pleased that GE and the French government set aside their goals for achieving 100 percent of their objectives. They reached a compromise that will create a formidable competitor while protecting French national interests.
While the establishment of a viable Eurozone is important, it should not serve as an anti-American bastion. Promoting economic development is in everyone’s best interest.
Originally published in the Sarasota Herald-Tribune
