Justice Department Requires General Electric to Divest Aftermarket Business in Order to Complete Alstom Purchase
The Department of Justice announced today that it will require General Electric Company (GE) to divest Alstom S.A.’s subsidiary Power Systems Mfg. LLC (PSM) in order for GE to proceed with its proposed approximately $13.8 billion acquisition of Alstom.
The Antitrust Division filed a civil antitrust lawsuit in the U.S. District Court of the District of Columbia to block the proposed transaction. At the same time, the department filed a proposed settlement that, if approved by the court, would resolve the department’s competitive concerns alleged in the lawsuit.
“The acquisition as originally proposed would have eliminated General Electric’s primary competitor in the supply of aftermarket parts and services for GE gas turbines in the United States,” said Principal Deputy Assistant Attorney General Renata B. Hesse of the Antitrust Division. “We appreciate the close cooperation of the European Commission, which greatly facilitated our investigation and helped formulate remedies that will preserve competition in the United States and internationally.”
The European Commission announced today that in order to address its competitive concerns with the acquisition, it will require GE to divest a package of Alstom assets relating to the development and manufacture of large gas turbines widely used in Europe, including PSM. The department’s Antitrust Division and the European Commission cooperated closely throughout the course of their respective investigations, with frequent contact between the agencies.
According to the department’s complaint, only three competitors, including GE and PSM, develop, manufacture and sell new aftermarket parts to repair and service GE 7FA gas turbines installed in the United States. PSM’s entry in 1998 into the aftermarket parts and service market led to widespread price decreases, including a drop of 60 to 70 percent in the price of replacement parts for GE 7FA gas turbines. In addition, PSM’s entry led to the development of many new parts that have improved the performance of GE 7FA gas turbines. The loss of PSM as an independent competitor would have harmed owners of GE turbines and ultimately U.S. consumers.
The proposed divestiture will remedy this loss of competition. Under the terms of the proposed consent decree, GE must divest Alstom’s PSM subsidiary to Ansaldo Energia S.P.A. (Ansaldo) or an alternative, independent buyer approved by the United States.
GE, based in Connecticut, is a global manufacturing, technology and services company. GE’s subsidiary, GE Power and Water, provides power generation, energy delivery and water process technologies in a number of areas in the energy industry. In 2014, GE’s revenues from aftermarket parts and service for GE 7FA gas turbines were approximately $730 million.
PSM, headquartered in Florida, is a wholly owned subsidiary of Alstom, a French corporation. PSM provides aftermarket parts and services for a variety of turbine engines, including the GE 7FA model. In 2014, PSM’s U.S. revenues for aftermarket parts and service for GE 7FA gas turbines were approximately $90 million.
As required by the Tunney Act, the proposed consent decree, along with the department’s competitive impact statement, will be published in the Federal Register. Any person may submit written comments concerning the proposed settlement within 60 days of its publication to Maribeth Petrizzi, Chief, Litigation II Section, Antitrust Division, Department of Justice, 450 Fifth Street, N.W., Suite 8700, Washington, D.C. 20530. At the conclusion of the 60-day comment period, the court may enter the final judgment upon a finding that it serves the public interest.
GE Alstom Complaint (426.5 KB)
GE Alstom PFJ (1.52 MB)
GE Alstom CIS (1.01 MB)