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> 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 o
by save_ferris 8y ago
> 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.
- jopsen 8y agoThe 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..
- save_ferris 8y agoThat 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)?
- yorwba 8y ago> 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.
- jopsen 8y agoIn software out competing might be simple.. we can easily scale 2x :) But I would imagine that scaling you train manufacturing by 2x is hard.
- j16sdiz 8y agoWhy merge if you can acquire?
- User23 8y agoMaximizing profit is not the ultimate goal of capitalism. Maximizing executive compensation is the observable ultimate goal of capitalism. As an example, when Hostess declared bankruptcy they got permission from the court to loot the pension fund to pay 7 figure executive bonuses and shareholders also got dunked on.
- toast0 8y agoMergers often cause a great deal of distraction for the involved companies, and carry a significant amount of risk for the combined company. If the combined company doesn't manage to combine its product lines, it may not save any costs. If the customers don't like the combined lines, they may switch to a competitor. If the combined company spends too much time figuring out what to do, competitors may win over their customers.
- DeonPenny 8y agoBecause the CRRC is a state backed SOE not a private company. So the Chinese government will highly subsidize these companies which is why Sieman and Alstom will never actually have a chance to compete with them.