Polska Pesa ogłosiła chęć przejęcia hiszpańskiego producenta pociągów wysokich prędkości Talgo. To dobry pomysł, zgodny z pożądaną ewolucją europejskiego modelu ekonomiczno-społecznego, którą spowalniają obecnie Niemcy. Na straży protekcjonizmu stoją z kolei Francuzi.
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In 2018, Spain's CAF Group acquired one of the pearls of Polish industry, public transport vehicle manufacturer Solaris, for €300 million. Almost at the same time, the other flagship company from the Vistula River, rail vehicle manufacturer Pesa, which was saved from bankruptcy by its takeover by the Polish Development Fund, was going through huge problems. To this day it still owns the Bydgoszcz-based company. Thus, Pesa is now de facto a state-owned company.
A few years down the line, the situation may be reversed, as a desire to take over Spanish high-speed train manufacturer Talgo has been announced by Pesa. Talgo has already been tried by the Czechs of Škoda and the Hungarians of Ganz-MÁVAG, who offered as much as €619 million. The latter deal was blocked by the Spanish authorities because of Hungary's colligations with Russia. As we remember, no such conservative instinct was shown by the Law and Justice government when it sold part of Lotos to Hungary's MOL.
Pesa has already begun working with Talgo, signing an agreement to jointly produce vehicles for high-speed rail in Poland. "Our memorandum with Talgo concerns cooperation in building trains not only for Poland, but basically for countries in the region. So we are also thinking about Rail Baltika, for example. We are convinced that the combination of knowledge and experience of Pesa and Talgo, guarantees the presentation of an interesting offer for the carriers of the Tricity area," stated Pesa CEO Krzysztof Zdzierski in an interview with the "Railway Market" portal.
How to compete with giants from China and the US
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European industrial companies have already tested similar mergers on a much larger scale. In 2019, theautomotive giant Stellantis was formed. It was formed by two companies that had themselves previously been formed through mergers. We are talking about the Fiat-Chrysler conglomerate and the PSA Group, formed after Peugeot acquired Citroen. According to rankings of the Fortune 500, Stellantis currently the second-largest automaker in Europe after Volkswagen in terms of revenue and the first in terms of profits - ahead of the German conglomerate by more than €2 billion.
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Of course, it would be remiss to enthuse about Stellantis' performance. The corporation is cutting costs at the top, and recently announced layoffs of 2,500 employees, including the liquidation of its entire factory in Bielsko-Biala.
Fiat's merger with PSA, however, shows that European companies are increasingly coming to the - probably correct - conclusion that they cannot compete on their own with the growing giants from China and the US. And even with the Korean Chebols and old corporations from Japan, such as Toyota, which beats both Stellantis and Volkswagen in terms of profits, although its revenues are lower than the latter. Korea's Hyundai has only twice the revenue of VW, although not so long ago cars from that company were not taken seriously at all.
Overall, Europe is losing out to Asian and American competitors because of higher costs. High labor standards or climate policies raise the expenses incurred during production significantly, which ultimately translates into lower profits or higher prices (and thus usually lower profits due to falling sales). Barring incorrigible free-marketeers, no one would like to see a reduction in the European social gains that make up our continental economic and social model.
It is what sets Europe apart from the rest of the world. After all, the goal is not to win the economic competition with Asia by becoming more like it, because that would mean de facto defeat. The goal should be to return the EU to the ranks of technological and industrial leaders, while preserving the European welfare state model.
Merger as an alternative
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An alternative way to reduce costs is precisely mergers. Larger companies have a much wider scope for cost optimization, as they can take advantage of economies of scale, whereby some of the necessary expenses are spread over a larger number of units produced.
Manufacturing companies can also jointly design and purchase semi-finished products after a merger. Škoda, VW and Seat may be very different from the outside, but inside they look very similar, as they use exactly the same finer parts. Not surprisingly, they are brands belonging to the same Volkswagen Group.
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Preserving the European economic and social model will unfortunately also require a more assertive trade policy. Since we impose high production and labor standards on ourselves, at the same time we cannot allow manufacturers with much lower ones to enter the EU market, as they would quickly push companies out of the continent thanks to low prices.
High tariffs and guided taxation, such as the carbon footprint tax (CBAM), which the EU is just launching - far too late, by the way - serve to level the playing field.
With much slippage, the EU has also introduced tariffs on electric cars made in China, whose manufacturers benefit from government subsidies that are incompatible not only with EU regulations, but also with the rules of the World Trade Organization, to which the Middle Kingdom belongs. Paradoxically, Germany, where Volkswagen is headquartered, was at the forefront of the five-member complex's opposition to the tariffs. The leader of the countries supporting tariffs on Chinese EVs was France, where one of Stellantis' pillars, PSA, originated.
Why Germany wants an agreement with Mercosur
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The reasons for the divergence can be boiled down to economic issues alone. The Germans trade extensively in China, both exporting their goods there and conducting their own production in Chinese factories. The French do not have very developed trade relations with the Middle Kingdom - suffice it to say that Beijing has applied tariffs on brandy imported from Europe (mainly France) as retaliation.
In addition, Stellantis is switching to producing only electrics. At the huge Stellantis (formerly Fiat) factory in my hometown of Tychy, mostly electrics roll off the line.
Germany's opposition to more protectionist EU policies, however, seems to have a deeper basis. Germany simply continues to believe in the effectiveness of Europe's old growth model of promoting free trade. The problem is that only leading exporters such as Germany, Denmark and the Netherlands benefited from that model, while the less competitive countries of Southern Europe had to go through an extremely painful crisis.
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Currently, Germany is also the main proponents of a trade agreement with Mercosur, a group of South American countries - including its largest economies Argentina and Brazil. Here again, France and Poland, among others, are on the other side of the argument, with the agri-food production sector playing a big role.
A trade agreement with South America would allow much cheaper production from Mercosur countries into the EU market, pushing out European producers or lowering employment and production standards in the EU.
But the Germans are also opposed to European mergers, although they themselves have previously acquired flagship companies from less wealthy countries. Volkswagen, for example, took over the national brands of the Spanish (Seat) and Czech (Škoda). They are currently blocking the takeover of Commerzbank by Italy's UniCredit. "Europe needs bigger, stronger banks. [...] Without pan-European champions, the common bloc will never realize its ambitions or overcome its development challenges." - stated UniCredit CEO Andrea Orcel.
Returning the EU to the seat of at least one of several global technological and industrial leaders will require deepening European integration. In turn, this cannot be done without a shutdown of the common market and some form of communitization of public finances.
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Against all this is Berlin, which is emerging as the main brake on European integration, hand in hand with Hungary and Slovakia, which, not coincidentally, also voted against tariffs on Chinese EVs. Paris, on the other hand, is showing an understanding of the situation and an awareness of its seriousness, advocating, among other things, strategic sovereignty for Europe and greater protectionism.
Paradoxically, therefore, the survival and consolidation of the EU will depend on overcoming the resistance of Germany, which for unknown reasons is considered in Poland - especially on the liberal side - as an advocate of a united Europe. They never have been, and certainly not now. Fortunately, Paris and at least some of the countries of Northern and Southern Europe could be an ally. A possible and still theoretical merger between Pesa and Talgo would be much more pro-European than the recent demands coming from Berlin.
