Comment by IAmBroom
7 hours ago
I work in rail safety. Two major non-Chinese train companies attempted to merge a few years ago, explicitly to build a company that could compete with China's national company, and provide safer alternatives to state-sponsored cyberhacking of Western rail.
It fell down to an anti-monopoly decision by a single person in the EU ministry, who killed the proposal. Several attempts were made to streamline the merger, but she wouldn't budge.
As a result, CRCC continues to win contracts abroad, largely (it is believed) by undercutting competition. IP theft is known to be one objective of their at-loss or low-profit contracts (I've been involved in fighting that, specifically).
It's hardly a stretch to imagine that having control of the rail in countries that might oppose you militarily is strategically huge.
This article is about busways, but the parallels are obvious.
About a year ago a Polish rail equipment supplier brought a lawsuit over a locomotive because it was serviced by a third-party, and the service was enabled by jailbreaking software in the locomotive.
Surveillance tech in products doesn't necessarily imply grey zone warfare. But that doesn't make it a good thing either.
I'm not sure this comment does justice to the situation.
Poland put out a separate bid for manufacturing and servicing of their locomotives and one company won the manufacturing bid while another won the servicing bid.
The servicing company was unable to get the trains into working order and after hiring hackers accused the manufactoring company of bricking the software on purpose by including geo-fences where the trains would no longer work after arriving at the servicing company's property.
Perhaps the interesting part to me was Dragon Sector's (the hackers) claims that the software needs to be blessed so although they discovered problems they never changed anything because they don't have the authority to bless it and heavily imply that the fact that the manufactoring company is changing the software at will is illegal.
The changes by the manufactoring company had an (undisclosed) activation sequence added to it so you didn't need to modify the software in order to get the train working so the servicing company never actually modified the software.
https://www.youtube.com/watch?v=XrlrbfGZo2k
https://www.ifixit.com/News/112008/polish-train-maker-is-sui...
The jailbreak was necessary because Polish supplier hardcoded location of their service shop and added code which makes train inoperative if serviced elsewhere.
The European champion would still be ten times smaller than the Chinese but would have factual monopoly in Europe. I don’t think blocking the merger was entirely unreasonable.
The parent comment is describing a scenario where the Chinese company may get a factual monopoly in Europe because it can outcompete the two European companies due to economies of scale.
Or outcompete because it's state-funded, and can inject things like remote access (that the state might like the option to use one day).
It's really confusing that the EU don't consider this "dumping". I thought that was this big thing that they cared about.
Wouldn't cases of possible corporate-enabled espionage, like the one being discussed be a big competitive advantage for the European companies, regardless of their pricing or scale?
And that competitive advantage could presumably give them more scale?
Euro/North American, but still smaller than China's company.
Your second sentence is quite a jump, however: "It won't be as big, so there's no point in trying to compete at all."
Also it would probably be 5x as corrupt.
The things you see in EU public tenders is just amazing, especially when they's little to no competition.
5x as corrupt as it is now, or 5x as corrupt as the Chinese counterpart? Because they're pretty corrupt too...
>The things you see in EU public tenders
Can you give examples of what you (obviously, since you're commenting) have seen, and how typical it is?
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I'm with you on this. I feel like too much boogye-man-ing and FUD scaremongering is taking place on the cover of "China evil and has giants" in order to justify breaking anti-monopoly laws and allowing our own monopolies to form under this justification, that will only benefit shareholders of those companies but eventually harm European consumers via lack of innovation due to lack of competition, price gouging and the European workers via the inevitable layoffs that follow such mergers.
If you have two large, slow, bureaucratic and uncompetitive companies, then merging them together won't make the resulting giant less so, but the contrary, it'll be even more inefficient and uncompetitive, and then expect government bailouts because now they're too big to fail.
So now you have a state-owned Chinese monopoly controlling your transportation.
Just don't buy from them. Do you think making a local monopoly in Europe will lower European prices?
Who the fuck invented that logic of "those companies prices are too high, we have to let them consolidate into a monopoly so they lower their prices"?
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The west is too lax on some of these officials. People like this should be thoroughly investigated. China is flagrantly breaking the rules of the WTO that the west has set up, having state backed companies, and these people are either purposefully or unintentionally undermining the west's efforts to fight back.
Logistics in war is essential so it’s not a stretch. You can easily extend that line of thought to anything from drones to cars.
Yes easily, like how they use all the public transit buses at the frontlines of ukraine
Ukraine has been buying up every cheap car in Europe for use in miscellaneous service just behind the front or as low profile transportation at it, so I'm not sure what your point is?
Civilian transportation has numerous vital roles in supporting a nation during a war.
Is there a strategy where China could remain a supplier of "lobotomized" hardware? Example: China supplies the trains, but all the silicon must be added after import.
Did anyone investigate this person to see if she’s being bought by any “Foreign” Gov’t?
I found it very hard to believe that a Chinese company has more influence than Alstrom + Siemens, in Europe. It might make sense if it's a US company, but I find it difficult to believe for a Chinese one, especially that the recent Netherland example shows that EU can do whatever they want using what excuses they can find, and execute very efficiently.
I'd like to post some questions for thought:
1. What is exactly the bidding process of that particular transaction the OP described?
2. What is exactly in the contract? Does it force the Chinese company to use a lot of local companies for sub-contracting, at the same time keeping a very low profit? In essence, this basically means the EU companies grabbed the biggest share while the Chinese company just got the job. I'm not saying this is the case, but I highly doubt it IS the case as I heard similar stories from other companies.
Or maybe she just doesn't believe it's worth discarding anti-trust law over the bogeyman of the day.
The two train companies that couldn't merge can still make trains, and still sell them to whomever they want. European purchasers can still buy them. And after reading articles like this one, these two companies have a big competitive advantage: they don't include Chinese backdoors. Maybe they're small now, but if the Chinese train/bus/etc. manufacturing companies end up being blacklisted in the EU, these two companies will grow. And, better yet, there will still be some healthy competition in the space.
Don't attribute to malice what can adequately be explained by ignorance.
That seems like a cliché happily championed by the malicious.
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If the past decade of my life has taught me anything, it's "attribute all malicious actions to malice." It's usually just a matter of direct vs. indirect malice. Meaning, are they directly benefiting from their malicious actions or are they just assholes who "do it for the lulz".
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Or by competence… Why are we trusting that creating a large and corrupt company would somehow help anyone in EU?
Results matter.
China is not a free market and shouldn’t be allowed to compete as if it were.
Is there really not enough room in the global market for two smaller companies to compete (and win) against CRCC?
I think this is especially not that big a deal considering the national security implications. I expect Norway would contract with a non-Chinese company for bus, rail, everything from now on due to that, regardless of whether or not they are smaller than the CRCC.
No. Not when China subsidizes its strategic exporters on so many levels.
The problem with "oh, but wait, this merger actually improves competition" is that mergers are a contagion. A large competitor's mere existence creates an economic imperative for more mergers. This happens both horizontally (across multiple firms) and vertically (up and down the supply chain). When you get big, you can start stripping your vendors' and customers' of their profit margin, which means they need to get big to compensate. Even if a merger might have positive competitive effects, it still spreads the contagion. Which is a problem, because anyone who doesn't or can't get big will get fucked. That includes individual consumers and workers.
If the problem is that Chinese companies are shipping train firmware with backdoors, then you need to ban those companies. Problem is, given the Newag situation[0], I don't think they can actually do this at the level of individual procurements. So they need specific EU directives banning this behavior and explicitly adding a process by which procurement can ban suppliers for prior noncompliance. What facilitating an illegal merger will do is reduce the EU's bargaining power with industry, ensuring that we get more backdoored trains and more risk.
[0] Short version: they got caught shipping firmware that bricks the train if you take it to a third-party repair shop, even though the contract specifically mandated Newag provide repair manuals. EU agencies and member states do not have the power to disqualify Newag from future tenders for failing to adhere to prior ones, so they keep winning contracts
Re: the Newag situation, can their customers not sue them, win, and hurt Newag's bottom line enough that they stop pulling shit like this?
> EU agencies and member states do not have the power to disqualify Newag from future tenders for failing to adhere to prior ones
That seems like a problem that can be fixed, given the political will to do so.
How do you confirm that a train controller or any other piece of hardware does not contain a backdoor using industry standard software tools?
You can write whatever you want into a contract, but if you have no way to validate it, it's meaningless.
Also, the state-owned (and subsidized) Chinese company that doesn't have to play by the West's antitrust rules doesn't need to worry about your "contagion" concerns.
> You can write whatever you want into a contract, but if you have no way to validate it, it's meaningless.
3rd party audit like everything else?
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> Two major non-Chinese train companies attempted to merge
Siemens (Germany) and Alstom (France)
> It fell down to an anti-monopoly decision by a single person in the EU ministry, who killed the proposal
Margrethe Vestager, the European Commissioner for Competition at the time (2019). At the time of the decision, she said "No Chinese supplier has ever participated in a signaling tender in Europe or delivered a single very high speed train outside China. There is no prospect of Chinese entry in the European market in the foreseeable future." This has since been proven to be a bad prognostication, as China Railway Signal & Communication (CRSC) is actively deploying its ETCS Level 2 signaling system on the Budapest–Beograd railway line in Hungary[1]; and China has delivered trains to Serbia, leased trains to Austria's Westbahn, acquired German locomotive manufacturer Vossloh Locomotives, and participated in a public tender in Bulgaria for electric trains.
She is no longer in that position. She has as of 2024 become "tough on China,"[2] acknowledging mistakes made in the past and touting how "China came to dominate the solar panel industry... and is running the same game now, across strategic industries including electric vehicles, wind turbines and microchips."
She now says Biden's IRA was a mistake, that Europe has been de-industrializing and that is not a good thing, and that Europe has been too afraid to impose tariffs on China out of fear of retaliation from China.
It sounds remarkably similar to the MAGA playbook on trade and re-industrialization.
[1]https://www.railwaygazette.com/infrastructure/china-railway-...
[2]https://www.politico.eu/newsletter/brussels-playbook/vestage...
Thank you for the details.
> ...acknowledging mistakes made in the past "
That's falling somewhat short of admitting she alone fucked that situation up. The US and Canada had already given permission for the merge to bypass antitrust laws.
Antitrust is important, so why not pass a law that prioritizes national or European companies for critical infrastructure, even if they're more expensive? Creating a monopoly to combat another monopoly is unlikely to end well in the future.
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If you are a capitalist, you should be pro-acquisition (i.e. of smaller firms) and anti-merger (for larger firms), because mergers are a form of crony capitalism that leads to reduced product quality and market dysfunction.
from: https://www.promarket.org/2023/10/02/merged-firms-offer-less...
This finding has been consistently true since people have started measuring merger outcomes, "we find that each merger is associated with a quality decrease (increase) in markets where the merging firms had (had no) pre-merger competition with each other, and the quality change can have a U-shaped relationship with pre-merger competition intensity. Consumer gains/losses associated with quality changes, which we monetize, are substantial " – https://www.sciencedirect.com/science/article/abs/pii/S01677...
It is doubtful that merging two companies would have improved the EU's capability to compete with Chinese state operators. On the other hand, lowering the capital threshold to create a new entrant would definitely improve the EU's competitive position and capabilities, https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=cele...
I think most capitalists aren't pro or anti acquisition, for the simple fact that they don't believe they have the right to tell two people (or two groups of people) that they aren't allowed to associate with each other.
But if you're more consequentialist, you might take it on a case-by-case basis.
Can you elaborate on the IP theft stuffs by winning contracts? Just curious how it is done.
Not sure why there are no specifics, but for anyone interested this seems to the merger that was denied, along with the reasons why it was denied.
https://ec.europa.eu/commission/presscorner/detail/es/ip_19_...
I mean one way to handle that is to just outright exclude Chinese companies from such bids.
So put 70% anti dumping duties (tariffs) on CRCC trains like they did with ebikes?
This will probably get fixed with software audits necessary for compliance under the NIS2 directive. The EU fixed the problem with more regulation and bureaucracy, ensuring that only the big boys can comply. Protect us from China by becoming China?
Honestly I couldn't care less considering how scummy our train making companies are, I'm fine with Chinese selling trains on a loss for pieces of paper. It's their problem if they want to build them and ship them for pennies, their loss.
Our companies meanwhile are all turning in John Deere, and I'm glad the merger was blocked.
The security part, obviously I do care but this article says very little about it.
You are, of course, referring to Alstom and Siemens.
"A slap in the face is more effective than ten lectures. It makes you understand very quickly." —Leopold van Sacher-Masoch
Siemens received the slap in the form of Stuxnet. Industrial controls and transport are not the same business unit, but enough of the message got around internally.
I firmly believe Alstom would not be making such garbage today, at least not from a cybersecurity perspective, had this merger gone ahead. And, let's say, I know quite well exactly what type of hot garbage they unfortunately continue to make.
It's a shame.