For FIF  President  Louis Nègre , MSE Groupings deserve all the help they can get, so that  medium-size enterprises within the sector can prosper. Some are badly impacted by the downward pressure on prices and by the reversal of SNCF investment prospects.

Ville, Rail & Transports : The world railway market is booming, with manufacturers posting excellent results, yet the French railway industrial fabric is in poor shape. Could you explain this discrepancy?

Louis Nègre : I would personally be much more circumspect on this point. Just remember that the turnover of French railway manufacturing industry, despite stabilising over the past two years, nevertheless increased by 24% between 2006  and 2009, in other words at the same pace as the world market.

Moreover circumstances vary appreciably from one activity to another. What is actually happening, against a background marked by stiff competition not only in Europe but across the world, is that a number of companies are caught in a pincer movement induced not only by increasingly powerful contractual pressures on prices from their customers but also by a domestic market which has been stagnating for the past year due to the prevailing crisis and the reversal of SNCF investment prospects.

Some of these companies, for reasons to do with their strategy or to their inadequate economic and financial size, are unfortunately encountering genuine difficulties, but thankfully this is not the case across the board.

Ville, Rail & Transports : To make French industry more robust, the buzzword is to develop medium-size enterprises. How far has this concept been taken forward in the railway manufacturing sector?

Louis Nègre: The sector is currently thinking about ways and means of effectively promoting consolidations within the French railway SME (Small and Medium-Size Enterprises) community, drawing on a logic that is both market-driven and based on complementarity which could be geographical and /or technical. We will of course need to ensure that the mechanisms put-in-place are fully consistent with community philosophy and legislation governing aid to businesses.
The MSE route is obviously of  vital importance for the future of the French railway industrial sector, and by the way  for other industrial sectors too. We must absolutely pursue and promote this approach, in order to trigger  genuine momentum which will accelerate the creation of MSEs within the railway industrial sector.

Ville, Rail & Transports: Railway equipment manufacturers claim they only have visibility for one year, whereas rolling-stock builders can work to ten-year programmes. What should be done to afford the former some breathing space?

Louis Nègre: All depends on what the particular manufacturer produces. By the very nature of things, when a train builder delivers rolling stock to his customer, he has to contend with multi-annual cycles inherent in the type of products involved.  Suppliers of critical sub-systems and components also enjoy multi-annual visibility given the strategic dimension of their products. By contrast, those equipment manufacturers who tend to specialise in simple or standard products often have to live with this problem of “beyond one year” visibility. Because we are conscious of these difficulties, we today – through the working parties of the strategic committee for the railway industrial sector - are looking at ways of developing the types of practical solutions likely to help improve the current situation.

Ville, Rail & Transports : Is there a hope of the know-how and jobs in the whole sector  being preserved here, or will outsourcing cause everything to be delocalised to Eastern European or Far-Eastern countries? Will train builders here have to settle for assembly work and nothing else?

Louis Nègre: Not only do we all hope these assets will stay here, but everything possible must be done to avoid delocalisation. I feel convinced that numerous sector stakeholders today appreciate all the benefits (low logistics costs, robust supplier reactivity, proximity of business partners) derived from the preservation, even consolidation, of a regional or national industrial fabric.  However  this should not be taken to mean « no delocalisation ». We must not be naive, given that access to a number of markets and target countries (China, United States…) necessarily implies a degree of delocalisation. Moreover we must ready ourselves to face increasingly stiff competition - not only on world markets but also in Europe – from « exotic « equipment manufacturers. As you will know, this competition will focus primarily on the price of products which, I believe, will strengthen the case for  developing procurement policies based on the life cycle of products and no longer on the direct product-procurement price.

The reality is clearly more complex as regards the prospect of builders becoming mere « assemblers ». Admittedly, some builders do want to keep control over a number of critical functions, not only because of their determination to monitor the reliability of their products, but also because this approach is a positive guarantee of after-sales service in the long-term.  It is still not obvious that we will pursue to its conclusion the logic you mention and which reflects the reality of the automotive industrial sector, for example.

Ville, Rail & Transports : Germany today is viewed as the European country which has successfully maintained a robust industrial presence. Can French companies be saved by alliances with German counterparts?

Louis Nègre: Our priority must necessarily focus on consolidating the French railway industrial fabric as part of a sector-based approach. However if you ask me whether  it makes better sense for a French company to forge an alliance with a German firm or with an even more « exotic » firm in order to preserve jobs, my response unequivocally favours the first of these two options. As you may be aware, we at the FIF and within the French manufacturing sector have a number of enterprises whose parent company is located in Germany, and as far as I know their activities in France have not been put at risked as a result.

This aside, you know that I am a committed European. The dilemma facing our industrial sector calls in my view for European solutions as a matter of priority, and our interests going forward will best be served by forging alliances with German counterparts.

Ville, Rail & Transports: How does the railway industrial sector compare with the automotive or aerospace industries with their longstanding record of having developed a powerful equipment manufacturing sector?

Louis Nègre: These two industries had been confronted with globalisation well before their railway  counterpart, and this in turn had triggered consolidations both among builders and equipment manufacturers. Today our sector is faced with a similar challenge and its stakeholders should seize this opportunity to draw positive and negative lessons from the manner in which these other industries have developed and prospered.

Interview with François DUMONT