Cash-flow crisis forces Alstom to scrap 1.500 jobs

Financially troubled French Alstom, manufacturer of trains, metros, and rail systems, has to cut some 1 500 jobs or almost 10% of all commercial and administrative positions. At the same time, it will sell business units, although it is unclear which ones will be involved.

This should raise between 500 million and one billion euros. In this way, Alstom aims to reduce its mountain of debt by March 2025 by two billion euros – currently at 3,4 billion euros.

It is mainly the rail business of Canada’s Bombardier, which Alstom acquired almost three years ago for some 5,3 billion euros, that is strangling the French company. Alstom, the world’s second-largest rail manufacturer after China’s state-owned CRRC, denounced mismanagement under Bombardier that led to delays in orders and higher delivery costs.

Bombardier is scapegoat

In February, for example, it became clear that it already had to pay 80 million euros in fines for delays in delivering M7 carriages to Belgium’s public railway company NMBS/SNCB.

Furthermore, Alstom also points to losses from delays incurred on an extensive UK order for 443 of Bombardier’s Aventra trains. It also relied on giant orders to supply the UK’s expensive HS2 high-speed train, but these have been delayed, along with the broader project.

Belgium

So, what the reorganization means for the Belgian operations of the group, which, among other things, builds the M7 double-coaches for NMBS/SNCB, is not yet clear. However, the reorganization would not affect technical staff or factory workers.

In Belgium, Alstom employs 2 250 people. These include some 800 people at the Bruges site (production and maintenance), 1 430 at Charleroi and Fleurus (production, maintenance, and research and development), and 20 at the headquarters in Brussels.

The Netherlands

In the Netherlands, where Alstom has supplied trains to NS, around 400 employees work at 11 locations, performing maintenance services and supplying signaling systems, among other things. Again, it is not yet immediately clear what the impact would be for Alstom’s Dutch divisions.

However, it does look like the UK will be particularly affected by the change in direction. According to the BBC, more than 1 300 jobs are at risk at Alstom’s Litchurch Lane factory in Derby, the UK’s largest rail assembly factory.

The site has no confirmed workload beyond the first quarter of 2024, and, according to a Derby City Council leader, Alstom has informed them that “after months of talks with the government, they must now plan to end the production of rolling stock with the city.” In total, Alstom has 80 000 employees in around 70 countries.

Weak commercial performance

The top of the group is also affected by the restructuring. From July 2024, Poupart-Lafarge will be only the managing director and no longer chairman of the board of directors. Former Safran general manager Philippe Petitcolin will then become president of the group. Poupart-Lafarge declined to speak of “being under supervision” and welcomed this appointment as “an excellent idea.”

In early October, Alstom warned that it expected a negative cash flow of 500 to 750 million euros in its current financial year after previously assuming a “significantly positive” cash flow.

No dividend

In the first fiscal half, cash flow dipped 1,15 billion euros into the red. Alstom’s shares have plunged more than 37% since October and 47% since the beginning of the year. Alstom had already announced it would not pay a dividend this year.

“Although demand remains on track, despite some volatility, our commercial performance is weak,” stressed Henri Poupart-Lafarge, CEO of Alstom, on Wednesday. He further stated that the global action plan will reassure rating agencies and achieve medium-term objectives.

In the future, Alstom aims to improve its operational performance by reducing delivery times and positioning itself on quality orders with higher potential margins.