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UPDATE 2-Alstom and French government clash over future of Belfort plant

(Adds Alstom spokesman, French PM, details on ownership)

By Julien Pretot

PARIS, Sept 13 Alstom will go ahead with plans to shut down manufacturing at its Belfort plant in eastern France, its CEO told staff on Tuesday, setting up a confrontation with the French government which 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 furore over the weekend and the government demanded he reconsider. With French unemployment sitting at around 10 percent and a 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 and seen by Reuters, 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.

An Alstom spokesman later told Reuters that even though the memo was dated Sept.13, it had been written last weekend and should not be seen as a response to the government, but it nonetheless went down like a lead balloon with the government.

Less than an hour after it was made public, President Francois Hollande - speaking during a state visit to Romania - refused to give ground.

"Everything will be done to ensure that Belfort endures, and that means for years to come," he told journalists.

'PATIENCE'

Prime Minister Manuel Valls struck a firmer tone later in the day. "I want to say to Alstom management that they should forget any plan to close the Belfort site and that they can count on the government to move forward," he told reporters.

Valls said new orders, from France and abroad, should take between days and a few months to be finalised. "What I ask is a bit of patience in the coming days, let's not get carried away."

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.

The government took control of a 20 percent voting stake in Alstom after the group's sold its energy division to U.S. giant General Electric.

It has until October 2017 to exercise an option to buy the actual stake from construction group Bouygues at a minimum 35 euros and secure its influence over the company.

But with the shares currently languishing at around 24 euros, it is more likely to wait until an eight-day window in October next year when it will be able to buy at market prices. (Additional reporting by Leigh Thomas, Jean-Baptiste Vey, Gilles Guillaume, Benjamin Mallet, Emmanuel Jarry; Writing by Michel Rose; Editing by Andrew Callus and Pravin Char)

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