Italy in talks to create rail group with GE's help - unions

Reuters

* Finmeccanica's Ansaldo units seen joining rail group

* GE could buy stake but Hitachi still in the running

* Italian railways could have role in new entity

By Danilo Masoni

MILAN, Oct 11 (Reuters) - Italy is in talks to create anational rail group and bring in General Electric oranother foreign firm as a majority investor, trade unions saidon Friday, in the latest intervention by the government to helprecession-hit businesses.

The plan would involve a state-owned holding company takinglarge minority stakes in train maker Ansaldo Breda and railsignalling firm Ansaldo STS, which are being sold bydefence group Finmeccanica, they said.

Finmeccanica, in which the state owns a 30 percent stake,put its rail and other non-core assets up for sale nearly twoyears ago in a bid to cut its near 5 billion euros ($6.8billion) of debt and focus on aerospace and defence.

The idea of a national rail champion had already been raisedby Prime Minister Enrico Letta. Along with a bail out plan forairline Alitalia, it is another example of his government'sincreasingly active role in the recession-hit economy.

Finmeccanica, which agreed last week to sell its gas plantsubsidiary Ansaldo Energia to the state-backed FSI fund, whollyowns cash-burning Ansaldo Breda as well as 40 percent of AnsaldoSTS, which has an overall market value of 1.3 billion euros.

Finmeccanica needs to sell these assets to join in anexpected consolidation of the European defence industry, whichis suffering from budget cuts in mature markets.

Marco Bentivogli, national secretary of the Fim Cisl union, said the industry ministry informed unions on Friday about agovernment plan to create a holding company for minority stakesin the three Ansaldos, which together employ 7,000 people inItaly.

In a statement, Bentivogli said the holding company wouldseek an international partner for Ansaldo Breda and Ansaldo STS,building on talks already started with General Electric (GE),which said in September it was interested in buying STS.

Italy's industry ministry and GE declined to comment.

GE already has a large presence in Italy and is creditedwith turning round oil and gas equipment maker Nuovo Pignone,which it bought in 1993 during a round of privatisations.

Reports of a recent visit by Ansaldo STS CEO Sergio De Lucato executives of GE's transportation unit in the United Statesto discuss a tie-up have not been confirmed or denied.

Hitachi Rail has also been considering buyingFinmeccanica's rail assets. A source familiar with the situationtold Reuters on Friday the Japanese group was still seen as apossible partner.

Details of the rail project have still to be agreed. Tradeunions raised concerns that the operation could lead to jobcuts, a loss of technological know-how and lower investment inthe sector.

Fim-Cisl, Uilm and the hard-line Fiom-Cgil trade union saidin separate statements that state railway company Ferrovie delloStato should take a leading role, and the project should alsosupport train maker Firema, which is under specialadministration.

The Italian government came under fire on Friday afterstitching together an emergency bailout for Alitalia thatcritics said should involve less taxpayer money and alonger-term strategy. Top investor Air France refusedto commit to the plan.

The government has also indicated it might consider measuresto safeguard national interests after Spain's Telefonica struck a deal last month that could see it graduallytake full control of former state-owned phone group TelecomItalia.

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