Alstom, the French engineering giant that makes high-speed trains and luxury cruise liners, was saved from bankruptcy yesterday when the European Commission and its foreign creditors agreed a €3.2bn (£2.2bn) rescue plan.
The agreement secures the immediate future of Alstom and the majority of its 110,000 employees worldwide, including 5,000 workers in Britain who are not already threatened by closures or sell-offs.
An initial rescue plan, amounting to a partial nationalisation by the French state, was rejected by the EC last week as contrary to European Union regulations, which ban state aids to industry. The revised package, thrashed out over the weekend, involved €2.4bn of new loans and bonds from creditors and up to €800m in bonds bought by the French government.
The European commissioner for fair business competition, Mario Monti, hailed the agreement as "constructive" and compatible with EU rules. A further refusal by the Commission would have created a serious crisis between Brussels and Paris, already in dispute over France's busting of the deficit guidelines for members of the euro.
Despite the life-line, Alstom is expected to go ahead with an existing programme of closures and sell-offs, which will affect half of its 10,000 jobs in Britain. It is also expected to look for a buyer for its prestigious ship-building company, Alstom Marine, whose Saint-Nazaire ship-yard has almost completed the world's largest and most costly cruise liner, the Queen Mary 2, for Cunard.
Alstom is to concentrate on its train-building business, from metro trains to TGV's, and its power-equipment companies, whose products generate an estimated one fifth of the world's electricity.
The company has 30 manufacturing sites in Britain, from Perth to Farnham in Hampshire, mostly acquired through its merger with GEC in 1989. It has already announced closures or sell-offs which will shed 5,000 of its 10,000 UK jobs.
A glut of problems, including a collapse in orders for cruise ships and €1bn of penalties imposed for defective turbines purchased from a Swiss company, have destabilised what was once a flag-ship of French enterprise and engineering prowess. Alstom has an estimated €5bn in debt - more than half of which was due for repayment over the next six months.
Alstom Marine, which employs 4,000 of the groups 27,000 French workers, is the most likely candidate for a further cash-generating sale. The problem may be in finding a buyer.
The Saint-Nazaire shipyard is regarded as one of the most advanced and best-run in the world, but orders for cruise ships have dried up and orders for ships of all kinds are scarce. Alstom stock was suspended yesterday but its bonds rallied on news of a likely agreement, with the 2004 euro bond rising 11 points to 96.5 per cent of its face value by mid-afternoon.
The EC had given Alstom and the French government until midnight last night to come up with a new rescue plan. A bail-out devised by Paris and French banks over the weekend was approved by foreign creditors yesterday.Reuse content