Alstom announced on Wednesday November 15 that it would lay off 1,500 employees worldwide. The global railway construction giant is downsizing while the train sector is booming. What is going on ?
Alstom’s order book is full. Countries and communities need trains, a more ecological solution than the car. In the sector, Alstom is number 2, behind the Chinese CRRC. But for several weeks, the French group has been going through a major cash flow crisis. Its debt now reaches almost 3.5 billion euros. On Wednesday, November 15, management announced the layoffs of 1,500 positions worldwide, mainly commercial and administrative positions, with the aim of reducing this debt.
Delivery delays and penalties
The problem is that Alstom wins contracts, but fails to deliver its trains on time. The SNCF in particular expects a lot and finds itself obliged to extend the lifespan of its trains. As a result, Alstom is accumulating late payment penalties and is having difficulty making available money. The company is taking on more and more debt amid high interest rates.
Alstom cannot deliver on time for several reasons. According to analysts, Alstom is spreading itself a little too thinly in its offerings, which poses problems for assembly lines. There are also problems in the management of the group, even if Henri Poupard-Lafarge, the CEO, defends himself, explaining that he must manage “pans” which date from the takeover of the Canadian Bombardier, in 2021, by Alstom. This buyout notably included the takeover of loss-making contracts.
Regain credibility
Today, this argument is no longer enough to reassure shareholders, starting with Alstom’s first investor: the Caisse des Dépôts du Quebec, which holds 17.5% of the capital and which is seeing its profitability melt away like snow in the sun. This loss of credibility was no longer tenable. Hence a decision to tighten the screw, to reduce costs by eliminating 1,500 positions. These are rather jobs in so-called “support” functions, i.e. sales and administration.
The group did not specify which sites will be affected. Alstom still has five factories in France, the group also has some in Germany. But the restructuring also touches the top, since CEO Henri Poupart-Lafarge, in office since February 2016, will only remain general manager. Philippe Petit Colin, who comes from Safran, takes over as chairman of the board of directors.
The objective of this plan is to reduce the debt by at least two billion euros by March 2025.