Alstom cutbacks threaten British jobs

Thousands of UK jobs were under threat last night after the Anglo-French engineering giant Alstom announced a savage cost-cutting and disposals programme.

The train and power station builder, which has a UK workforce of 13,000, said it intended to raise €3bn (£2.1bn) through the sale of unwanted businesses and save a further €500m in costs within two years after announcing record losses for 2002.

Alstom, formerly 50 per cent owned by GEC, said it would cut corporate overheads by 35 per cent and operating costs by 15 per cent as part of the radical cost-saving plan.

The group is selling its industrial turbines and power transmission and distribution divisions outright with the aim of cutting its €5bn debt mountain in half. These two divisions employ 5,500 staff in the UK in locations ranging from Lincoln and Preston to Rugby and Stafford.

News of the cost-cutting plan came as Alstom reported a record €1.4bn loss for last year after taking a €1.2bn charge to cover losses on the sales of power station gas turbines and rolling stock. Its new president and chief executive Patrick Kron, who has taken over from the outgoing Pierre Bilger nine months ahead of schedule, also said Alstom intended to raise up to €600m by the end of this year through a rights issue. Alstom shares fell by a half on the Paris stock exchange as investors questioned whether the company could survive.

The power transmission and distribution business, which sells equipment such as high-voltage transformers, is one of Alstom's most profitable divisions and could raise more than €1.5bn.

The disposal programme will leave Alstom with just two main businesses – transportation and power stations. Although the train building division is doing well, demand for large gas-fired power station turbines has tumbled by a half in the last year.

Alstom's difficulties have been exacerbated by technical problems on two of its turbines, the GT24 and GT26, which have resulted in it paying billions of euros in compensation to power station operators.

Details of the job cuts are expected to emerge in April after Alstom has held discussions with its European works council.