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Bombardier and Siemens to merge?

The worldwide financial press has been filled with reports that discussions are underway between Bombardier and Siemens about merging their rail divisions. A larger company than either of the current existing enterprises would provide the financial clout to compete more effectively against China’s CRRC Corporation, which has been winning more orders in the traditional manufacturers’ markets and now has ambitions to enter the European market.

The worldwide financial press has been filled with reports that discussions are underway between Bombardier and Siemens about merging their rail divisions. A larger company than either of the current existing enterprises would provide the financial clout to compete more effectively against China’s CRRC Corporation (itself a result of the 2015 merger of the country’s two biggest regional manufacturing companies), which has been winning more orders in the traditional manufacturers’ markets and now has ambitions to enter the European market.

CRRC’s strength in being able to help secure finance for major infrastructure projects in developing countries, as well as offer extremely competitive bids to gain market share, is seen as being a driver for the new talks.

In 2016 Siemens’ Mobility division made a profit of EUR678m on turnover of EUR7.825bn, while Bombardier had a turnover of USD7.574bn but is believed to have achieved just a 5.2% profit margin. Bombardier’s 70% stake in Bombardier Transportation is worth around EUR4.5bn, while Siemens Mobility is valued at EUR7.2bn. These figures reflect railway, tramway and metro rolling stock, signaling, automation and communications; Bombardier is well ahead of Siemens in terms of tram building, particularly in Europe (see TAUT 952).

A strong response from the regulatory authorities in Europe, fuelled by political reaction to likely job losses, is expected if the discussions lead to a formal proposal. Sources quoted by Bloomberg say that this could be made in the middle of the year.