L'exception francaise

30 June 2003

Another nail descends into the coffin of the French engineering group. Alstom is completely dependent on the goodwill of bank lenders. This is no way to maintain their confidence.

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Alstom said it had understated losses in its US subsidiary Alstom Transportation Inc (ATI) because of alleged improper accounting. The French engineering group plans to restate its accounts for the year to March 2003, taking an aftertax charge of E51m.

The senior vice president and vice president of finance of ATI have been suspended pending an internal review assisted by lawyers and accountants from outside the company.

ATI understated costs incurred on a railcar contract in anticipation of shifting them to other contracts and understated the forecast cost of completing the contract, Alstom said.

Alstom investigated the matter after receiving anonymous tipoff letters, thought to have come from concerned employees. The letters were also sent to the Federal Bureau of Investigation. The FBI is investigating the company, as is the US Securities and Exchange Commission. Alstom said it was cooperating fully with the investigators.

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