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French train maker Alstom has warned the British government that it is planning to mothball its historic Derby factory which employs 1,300 people after delays in orders for High Speed Line 2.
The plant, which Alstom acquired during its takeover of Canada’s Bombardier in 2021, does not have enough work to continue operating normally in the coming years, partly due to British Prime Minister Rishi Sunak’s decision to cancel the northern part of the project from Birmingham to Manchester.
“We have worked constructively with the government to secure a sustainable future for Derby Litchurch Lane, but after ten months of discussions we have run out of time and the production lines have stopped,” Alstom said.
“We will now consult with our staff, trade unions and our UK supply chain to provide as much certainty as possible,” he added.
Alstom and its joint venture partner Hitachi in 2021 won a contract worth £2.8 billion to build 54 trains for the HS2 rail line.
Mark Harper, Secretary of State for Transport, said in a letter published on social media platform X that he recognized the “challenges” faced by Alstom, Hitachi and their suppliers.
He said the government had “extensively explored the possibility of proposing opportunities for orders and refurbishment of rolling stock”.
But Harper also added: “Train manufacturing is a competitive commercial market, which means there can be no guarantee of orders for individual manufacturers, and this needs to be taken into account in business planning and bidding decisions.”
Alstom’s problems in the UK were one of the causes of the liquidity crisis announced by the group in October, which led to a build-up of inventories and delays in payment for orders. About a third of the squeeze stemmed from delays in completing the Aventra programme, a project to build 443 electric trains in the UK.
As Alstom sought to protect its investment grade credit rating, the French company soon after said it would begin selling assets and signaled it could potentially need to carry out a capital increase. Alstom shares are trading around 30% lower than before the October warning, close to record lows, to close on Thursday at 14.13 euros.
Preparations for the possible capital increase are underway, sources familiar with the matter said, although no final decision has been made on its size or timing.
Known for producing France’s high-speed TGV trains, Alstom is the world’s second-largest train manufacturer after China’s CRRC and has contracts ranging from Australia to Saudi Arabia, with more than 80,000 employees worldwide.