BERLIN, Sept. 27 (Xinhua) -- Siemens CEO Joe Kaeser on Wednesday described the merger of his company's rail production unit with its French competitor Alstom as a bid to ensure their long-run international competitiveness.
"We have the strength and desire to create a European champion on the global market," Kaeser told analysts during a conference. The producers of the TGV and ICE high-speed trains wanted to grow by more than 4 percent per year together and achieve combined revenue of more than 20 billion euros (23.45 billion U.S. dollars) as "Siemens Alstom" by 2023.
Siemens recorded annual gross revenue of 8 billion euros in 2016, compared with 7.3 billion for Alstom. However, Siemens' rail unit has been more profitable than Alstom's in recent years. Kaeser announced the goal to lift the French company's profit margin before taxes and interest from 5.8 percent to Siemen's level of 10 percent. He subsequently wants the figure for the new company to rise to 14 percent until 2023.
Siemens and Alstom hope to save 470 million euros annually through their fusion, above all by unifying their product development and bidding efforts in public tenders. Both firms currently have outstanding orders worth 61.2 billion euros.
Siemens chose Alstom as a partner over the Canadian Bombardier.
Siemens will hold around 50 percent of the future Siemens Alstom rail production unit. Kaeser described the relatively low share as a concession in return for transferring some of the Munich-based firm's debt to the new joint venture and being able to include the entirety of its operations within Siemens' balance sheet.
Alstom stocks traded in Paris shot up by more than 6 percent to 35.70 euros after the news. Siemens stocks on the German DAX index rose by 1.9 percent to 118.8 euros, marking the biggest Wednesday gains on the Frankfurt-based exchange so far.
The merger between Siemens' and Alstom's rail units has yet to be approved by the European Commission's competition authorities. Kaeser stressed that EU officials would have to consider the global market beyond Europe in order to assess the corporate fusion's implications correctly.
