Alstom cuts 1,500 jobs to stabilise finances

French manufacturer of trains, metros and rail systems Alstom is to cut some 1,500 jobs. While its sales are going up, the company’s shares dropped last month and the intervention is part of a larger reorganisation aimed at improving the industrial group’s finances, the company announced at its half-year results.

To cut costs, Alstom mainly wants to reduce the number of employees with administrative or commercial functions. Almost one in 10 jobs in those departments will disappear. Technical staff or factory workers will not be affected by the reorganisation. Next to reducing these ‘overhead costs’, Alstom also aims to deliver plans to ramp up production, currently over 10 per cent increase in cars production per year, and improve on-time delivery.

The company’s main concern is high debt combined with negative cash flow in the first half of the year. “The negative free cash flow of Alstom during this first half is a clear call for change”, said Henri Poupart-Lafarge, Chairman of the Board of Directors and Chief Executive Officer of Alstom in a press release. Debts must therefore be reduced by 2 billion euros. Besides cutting personnel costs, Alstom wants to achieve this by selling assets worth between 500 million and 1 billion euros, a programme for which has already been set in motion.

The Financial Times reported earlier this week that the French train giant was “battling to stay on the rails”, noting that the strategic 5.5 billion euro takeover of the Canadian Bombardier has been “overshadowed by a series of setbacks”. On the French stockmarket, Alstom saw a significant drop in the value of it’s shares since the beginning of October this year.

Sales grow but some Bombardier assets cause problems

Alstom’s struggles are related to its 2021 takeover of the train division of  Bombardier. A lot of money is being lost due to delays in deliveries of Bombardier’s Aventra trains in the UK. Poupart-Lafarge: “While demand remains sustained, despite some volatility, our commercial performance has been soft. The Bombardier Transportation integration continues to progress. However, the delivery of Aventra programme has been more complex than anticipated.” It has not been communicated what causes the delay in delivery of the trains. More than 2,600 Aventra cars have been sold in the UK since 2014, making it the UK’s leading train. The Aventra trains are also being used on London’s newly inaugurated Elizabeth line.

Overall, Alstom’s sales are growing and therefore the company is optimistic. Sales amounted to 8.4 billion euros for the first half of fiscal year 2023/24, representing a growth of 4.9 per cent on an actual basis and 8.8 per cent on an organic basis compared with Alstom sales in the same period last fiscal year. Organic growth refers to those streams of revenues that are a direct result of the firm’s existing operations, as opposed to revenues that have been acquired through the purchase of another company or business unit in the past year.

Poupart-Lafarge is staying as CEO of Alstom, but will no longer have the double position as Chairman of the Board. At the next Shareholders’ General Meeting in July 2024, the Board will propose Philippe Petitcolin, former CEO of Safran, to be elected as a Board Member, and new Chairman of the Board. “Production and sales growth is accelerating. We are undertaking a comprehensive action plan to maintain our investment grade rating and secure our mid-term objectives. Confident in the strength of our backlog and on the solid business foundations of Alstom, I’m fully committed to take up this challenge”, said the Alstom CEO.