Bombardier's PR whizzes pulled the oldest trick in the book on Tuesday night, when they realized they had to say something, however bland, on the blockbuster merger of Alstom SA of France and the rail division of Germany's Siemens AG, creating the world's second-largest train maker. They made a virtue of a necessity.
Bombardier Transportation (BT), the company's largely European rail business, was in fine shape, merci beaucoup, and was happy to go it alone while industry giants were forming around it. "While we will always explore strategic options that may create value, we do not need to merge with another major player to maintain our leadership position in the rail business," the company said in a statement.
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Never mind that BT, for years, has been trying to do a deal with either Alstom or Siemens while the big Chinese train makers, now merged into a giant called CRRC, opted to make world domination their business strategy.
As late as this week, some key Bombardier investors were convinced that BT and Siemens could surprise the market with a merger proposal, even though the rumours suggested an Alstom-Siemens union was more likely. BT was still thought to be in the running because, in the summer, it was widely reported that BT and Siemens were on the verge of forming two joint ventures, one to pool their rolling-stock manufacturing, the other for their signaling businesses.
Why the joint venture idea was scrapped isn't known, but here's a guess: It was more to do with European geopolitics than figuring out whether the offices with the best executive toilets would go to the Canadians or the Germans.
While Europe is outward-looking on trade – note the recent launch of the Canada-Europe free-trade agreement, known as CETA – it is decidedly inward-looking when it comes to building corporate champions. Putting a French and a German company together made patriotic sense; a Canadian and a German one far less so.
The European train business has always had nationalism in its DNA. Almost all of the biggest European countries had their own train-making businesses. Like the auto companies, they helped to revive Europe's industrial base after the Second World War.
Trains required steel, which required steel mills. They required engineers, which required technical schools. They put a lot of semi-skilled and highly skilled people back to work after the war debris was swept away. Their workers were part of powerful unions.
Their trains became marks of national pride. To this day, the train à grande vitesse (TGV), the super-fast train that was developed in the 1970s by GEC Alsthom (now Alstom), is a high-profile symbol of modern France and its razzle-dazzle transportation technology.
When BT threatened in 2011 to close its Derby factory in England, which was once the world's biggest train-making site, the British government went into spasms of grief and duly found a fat contract to keep it alive. In the 21st century, trains matter as much as ever – maybe more so – as European governments try to keep their waning tech and industrial sectors from wholesale exodus to Asia.
An outright foreign takeover of the Alstom or Siemens train-making business was always unthinkable. It became even more unthinkable when Emmanuel Macron was elected French President in the spring. More so than Germany's Angela Merkel or Italy's Paolo Gentiloni, he is Mr. Europe and is calling for greater integration as he seeks to reinvent the stalled "European project." Big European companies (read: Not American or Chinese) fit his style.
The rumours that Siemens and BT were on the verge of a joint-venture deal would not have been lost on Mr. Macron and his ministers. The political capital they threw at the union of Alstom and Siemens may have been enough to convince Siemens to ditch the Canadians, though, in truth, putting Siemens and BT together would have been a logistical pain because of the extensive overlap in Germany – whose factories and workers would go to the butcher's block?
BT is running out of options in Europe, especially since it wants to be a buyer, not a seller; the cash flow and profits from the train side are needed to prop up the ailing aerospace division, so the bigger BT becomes, the better.
Creating a "European" champion, in other words, will be hard as long as Bombardier, through BT, is doing the buying. BT will eventually get its prize – it has to, if it wants to compete on a global scale with the Chinese – but that prize may not be a big European train company. In the meantime, it, with a little help from its PR guys, will pretend not to worry as giants form around it.
Eric Reguly