According to latest reports, giant firms Siemens AG and Bombardier (TSE:BBD.B) are set to merge their train making segments, with an aim to compete with strengthening rivals in China.
Siemens, one of the world’s biggest industrial conglomerates, and MONTREAL, QC -based Bombardier (TSE:BBD.B), which is also a key plane maker, are reportedly pondering their train operations into two split joint ventures.
Reports said that the unit, Siemens, will control would manage the signaling operations of the two companies. And the other controlled by Bombardier would administer the rolling-stock operations. Signaling apparatus is used to keep trains clear of each other and rolling stock centers on train-making
Following the merger joint ventures would make about EUR15 billion of annual sales based on 2016 results of both firms train divisions.
Merger deal reportedly is set to be closed as soon as next month but there are still some major issues that need to be resolved. As in all complex big negotiations, talks could fail without an agreement.
These reports have emerged as 2015 merger of Chinese train makers CSR Corp. and China CNR is pushing competitors to slash costs and access additional customers to enhance revenue and profit. In 2016, Bombardier ‘s transportation business posted revenue of $7.57 billion, down almost 9% year over year.
Meanwhile Earnings before interest and taxes was also down from the year ago period. Siemens’ train business was in much better condition, as revenue and profit for the fiscal year ended Sept. 30, 2016, surged. Nevertheless, number of orders dropped 23% year over year.
MUENCHEN, Germany-based Siemens is one of the major supplier of train-signaling gear, accounting for around 25% of the worldwide market, in contrast with Bombardier’s estimated 10% share.
A spokesman for both Siemens and Bombardier (TSE:BBD.B) declined to comment over the reports.
Bombardier, SE:BBD.B, SE:BBD.B, Siemens, train