Bloomberg News

Alstom Chief Prepares Savings Blueprint to Counter Lower Orders

September 02, 2013

Alstom SA (SU), a French maker of power equipment and trains, is working on a plan to cut costs that includes curbs on travel expenses as orders slump.

“It’s a savings plan throughout the entire group which regards general expenditure such as travel, large-group meetings, missions,” Isabelle Tourancheau, a spokeswoman for the company, told Bloomberg today. She declined to say whether the plan will include job losses.

Chief Executive Officer Patrick Kron in May slashed his forecast for sales and margins, citing a slowdown in the global economy. Alstom cut jobs in Europe and the U.S. as utilities’ demand for power equipment slumped. The company plans to shut some plants that make windmills and power-grid gear, while expanding production lines for trains and turbines in countries such as China, Russia, Brazil and India to tap local demand.

Orders in the three months through June were below sales for the first time in 11 quarters, dropping 32 percent to 4.07 billion euros ($5.4 billion) as utilities and railways in Europe, Africa and the Middle East slashed spending. Sales at Alstom, based in the Paris suburb of Levallois-Perret, fell 4 percent to 4.58 billion euros.

Savings Blueprint

The savings plan will be presented to Alstom’s board on Oct. 1, Tourancheau said.

Kron has sent a letter to management saying that the company will “very soon” outline “swift and decisive actions, even if they are painful,” to strengthen the company, Le Journal du Dimanche reported yesterday. The purge will affect travel, seminars, hiring, training, consultants and sub-contractors, the newspaper said, without citing anyone.

Heads of manufacturing sites have been told in a July 24 message to cut back on travel and make other savings, Patrick Maillot, a CFDT union representative, told Bloomberg in an interview today. “I don’t think we’re poised to fire” as the backlog represents three years of sales at the transport unit.

In 2010, Kron announced 4,000 job cuts at sites that make coal- and gas-fired power equipment in Europe and the U.S. A year later, he followed with plants to cut a further 1,380 positions at its transport unit in Europe.

Bouygues Stake

The French company ranks behind General Electric Co. (GE:US) and Munich-based Siemens AG in the power-equipment industry. It also competes with Siemens and Montreal-based Bombardier Inc. (BBD/B) on train and metro cars, and with Siemens and ABB Ltd. (ABBN) in power-transmission markets.

The Alstom CEO, who had predicted sales would rise by more than 5 percent in the three years through March 2015, cut his forecast in May, predicting that revenue will “grow organically at a low single-digit” rate with margins little changed this year. He also increased his estimate for restructuring charges to 100 million euros to 150 million euros.

Bouygues SA, which has a 29 percent stake in Alstom, has threatened to exit its investment during negotiations with the government over phone licenses, Le Journal du Dimanche reported, without citing anyone. A Bouygues official declined to comment on the report.

Alstom shares rose 1.3 percent to 27 euros at 10:53 a.m. in Paris today. They are down 10 percent this year, while the CAC40 index has risen 9.9 percent.

Moody’s Investors Service cut Alstom’s long-term credit rating by one level in June to Baa3, the lowest investment grade.

To contact the reporter on this story: Francois de Beaupuy in Paris at fdebeaupuy@bloomberg.net

To contact the editors responsible for this story: Simon Thiel at sthiel1@bloomberg.net; Andrew Noel at anoel@bloomberg.net


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