
Alstom and Siemens Show How Not to Deal with China (and Vestager) - jseliger
https://www.bloomberg.com/opinion/articles/2019-02-06/alstom-and-siemens-show-how-not-to-deal-with-china-and-vestager
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ulfw
This is the classical example of what happens when you have to chase quarterly
(and yearly) results. They traded short term gains for long term losses.
Which, most likely, will be some other leadership’s problem.

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i_feel_great
"They traded short term gains for long term losses."

This is the entirety of the problem with modern capitalism, isn't it? There is
no way to account for long term losses that stakeholders can put value on.
Just look at what we've done to the environment.

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chillacy
I'm not a finance person but it seems there is at least a way to put a value
on future gains vs present gains, and it looks like money now is always
quantitively better than money later:
[https://en.wikipedia.org/wiki/Discounted_cash_flow](https://en.wikipedia.org/wiki/Discounted_cash_flow)

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i_feel_great
And that article has a section where it plainly mentions its shortcomings:
[https://en.wikipedia.org/wiki/Discounted_cash_flow#Doesn't_a...](https://en.wikipedia.org/wiki/Discounted_cash_flow#Doesn't_account_for_all_variables)

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lanevorockz
Just adding to the point, I believe that japanese deal with China in a much
more sensible way. Instead of giving away your intelectual property, it’s much
better to make it broadly available on the market.

Market grows with more adoption and you become a leader in the paricular
field.

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mistermann
Can you give an example of this approach?

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baybal2
Intel? USB, PCIE, DP, type-c, ACPI, UEFI, AHCI, NVME, nic offloading
standardisation...

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writepub
The proper response is both an IP transfer condition on all Chinese goods sold
in US and Europe, supplemented by tariffs. If Huawei is forced to transfer
their hardware, software IP for the right to sell in Europe, China will get a
taste of their own medicine

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save_ferris
> Far from being a partner, CRRC became the bogeyman that the two companies
> used to spook European antitrust authorities into waving through Alstom’s
> takeover of Siemens’s rail unit.

Why do Alstom and Siemens feel such pressure to merge given their Chinese
competition? Is it harder for each of these firms to compete individually
against a larger company? My understanding of economics is limited.

In the US, we hear all the time about how competition is good in markets
because it keeps prices down, which makes sense at a surface level. But
articles like this seem to tell a different story: that there are economic
forces causing major industry consolidation, which in turn hurts competition
and (I'm guessing) increases inequality.

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jopsen
The article sounded to me like they tried to do a merger arguing that CRRC
made it necessary..

For these two companies merging might make sense... Certainly they wouldn't
have to compete against each other if they did -- that's profit..

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save_ferris
That makes sense to me.

What economic forces encourage companies to compete with each other instead of
simply merging? I guess put another way: if maximizing profit is the ultimate
goal of capitalism, and more profit can be had by merging, why doesn't
everyone just merge? Are there market forces that encourage competition
outside of government intervention (i.e. antitrust)?

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yorwba
> Are there market forces that encourage competition outside of government
> intervention (i.e. antitrust)?

If you believe that you have an edge over your competitor, then merging with
them isn't the profit-maximizing move. Instead, you could just outcompete them
and own the whole market, rather than only part of the market leader.

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jopsen
In software out competing might be simple.. we can easily scale 2x :)

But I would imagine that scaling you train manufacturing by 2x is hard.

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adrianN
The Chinese market is so huge, CRRC could sell literally nothing outside of
China and still be the biggest rail company in the world. The fear is that
they could leverage their massive size to win contracts below cost until their
competition is bankrupt. But in my opinion if you want to prevent a Chinese
company from taking over the European market this way, the correct course of
action is not creating a de-facto monopoly in Europe, but instead structuring
contracts so that local companies are preferred. That is probably not
necessary before CRRC has a significant chunk of the international market, if
it is even necessary at all.

Investing as much in rail infrastructure as China currently does wouldn't hurt
either.

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jopsen
Seems like blocking this was the right choice..

But I'm curious as to the balance between ensuring competition and giving
advantages to local European companies, by letting them merge.. Curious, would
this merger have been allowed in the US?

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baybal2
> giving advantages to local European companies, by letting them merge

Doubtfully - putting together 2 weak and broken companies usually just results
in them becoming 1 bigger weak and broken company, not stronger.

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somberi
Related read:

[https://www.economist.com/europe/2019/02/07/margrethe-
vestag...](https://www.economist.com/europe/2019/02/07/margrethe-vestager-
bane-of-alstom-and-siemens-could-get-the-eus-top-job)

