Crunch time for Alstom

Alstom is a major player in the transport market

French government officials are gearing up for a key meeting aimed at hammering out a rescue plan for ailing engineering giant Alstom.

The European Commission, which on Wednesday rejected an initial bail-out plan on competition grounds, has given the French government until Monday to come up with a viable alternative.

French finance minister Francis Mer has pulled out of the annual Group of Seven (G7) meeting in Dubai in order to focus on Alstom, a French industrial icon with a workforce of about 110,000.

It employs about 10,000 people in the UK.

Alstom, which makes trains, gas turbines and cruise ships, has been hit hard in recent months by weak power markets as well as cost overruns on key projects and accounting irregularities at its US operations.

The company is also weighed down by debts estimated at 5 billion euros ($5.6bn).

Job losses

Alstom has announced plans to cut jobs - including about half its 10,000 strong UK workforce - in an effort to get back on an even keel.

The French government has hinted that the firm could be forced into bankruptcy if a rescue package is not agreed this weekend.

But analysts believe officials may have exaggerated the threat of bankruptcy in an attempt to force concessions from the European Commission.

They say the most likely outcome is a government loan which would keep Alstom going until a more long-term solution is found.

However, this would prolong the uncertainty hanging over the company, and may deter potential customers from placing orders, they warned.

Other options include a round of asset sales or even a complete break-up of the firm.