PARIS (Reuters) - Alstom (PA:ALSO) will go ahead with plans to shut down manufacturing at its Belfort plant in eastern France, its CEO said on Tuesday in a memo seen by Reuters, setting up a confrontation with President Francois Hollande who vowed "everything will be done" to prevent that.
The French engineering firm, which makes the country's TGV high-speed trains and is 20 percent controlled by the state, said last week it would stop making rolling stock at Belfort, where its first steam locomotive was built in 1880.
The move caused a political furor over the weekend and the government demanded he reconsider. With French unemployment sitting at around 10 percent since Hollande was elected in 2012 and a wide-open presidential election looming in April, no politician can afford to ignore such a high-profile case involving a company viewed as a national industrial champion.
But Alstom Chief Executive Henri Poupart-Lafarge showed no sign of backing down on Tuesday.
In a note emailed to staff, he said ceasing manufacturing at Belfort would help ensure the survival of the company's wider business. The plant is to be reduced to doing maintenance by 2018, affecting 400 staff who are to be offered jobs at other sites.
"Despite all our efforts, it now seems impossible to ensure a sustainable future for the activities of the Belfort site," he said.
"In spite of the great symbolism of Belfort and the group's special attachment to this site, we addressed this scenario today to preserve jobs and the position of the other sites of the group," he wrote.
But less than an hour after the memo was made public, Hollande - speaking during a state visit to Romania - also refused to give ground.
"Everything will be done to ensure that Belfort endures, and that means for years to come," he told journalists.
Alstom has cited a lack of orders and a need to streamline production.
"For over a decade, Alstom has received no locomotive orders in France and production of TGV locomotives, which is no longer assured beyond 2018, is at the lowest rate in its history," Poupart-Lafarge said in Tuesday's memo to staff.
Transport Minister Alain Vidalies said on Tuesday that new orders would be made in the near future to ensure the Belfort plant survives, putting pressure on state-owned railway company SNCF to clinch a deal with Alstom over a train order for its Paris-Milan route.