Siemens CEO Kaeser Cuts 15,000 Jobs to Catch Up With GE
Siemens AG (SIE)’s new Chief Executive Officer Joe Kaeser is widening job cuts from an initial plan after the failure to catch up in profitability with rivals General Electric Co. (GE) and ABB Ltd. (ABBN) cost his predecessor the job.
The company will eliminate 15,000 posts, representing 4 percent of its 370,000 workers worldwide, and a third of the reduction will come in the German home market, Oliver Santen, a Siemens spokesman, said by phone yesterday. He declined to give more regional details. Siemens, Europe’s largest engineering company, had first projected some 8,000 job cuts globally, a person familiar with the program told Bloomberg in October 2012.
Former CEO Peter Loescher lost his post following a July 25 announcement that the Munich-based company won’t meet a goal of profit representing 12 percent of sales next year. The target involved 6.3 billion euros ($8.5 billion) in savings at Siemens, which has faced mounting charges for failed power and train projects.
“If you see a billion euros in charges this year, that pretty much lines up with 15,000 job cuts,” Andreas Willi, a London-based analyst at JPMorgan Chase & Co. who has a neutral recommendation on Siemens stock, said by phone yesterday. “There have been charges in drive technologies, power generation and transmissions, so you expect them to bear the weight.”
The company has 60 sub-units that make products including trains, gas turbines, medical scanners and factory-automation gear. The manufacturer raised its forecast in July for charges associated with the Siemens 2014 efficiency program to 1 billion euros for this fiscal year from an earlier prediction of 900 million euros. The costs may increase by a further 100 million euros, Kaeser told analysts at the time.
In Germany, 2,000 employees at the industry division, 1,400 energy-sector workers and 1,400 in the infrastructure and cities unit will have to leave, Santen said. Another 200 administrative roles will also be terminated by the end of September 2014.
About half of the job cuts have already been implemented, while the rest are still being negotiated with unions and will include early retirements.
Siemens fell as much as 1.3 percent to 88.70 euros and was trading down 0.9 percent as of 10:04 a.m. in Frankfurt. That reduced the gain this year to 12 percent, valuing the company at 78.4 billion euros.
Kaeser, who was promoted to lead the company in August after holding the chief financial officer position for seven years, is working to regain investor confidence following five forecast cuts and a 22 percent stock decline in his predecessor Loescher’s six-year tenure.
The latest forecast was cut after a majority of units said in their internal predictions that they will probably miss their goals, two people familiar with the matter said at the time. The gap in so-called sector profit between the forecast and the actual numbers was about 1.5 billion euros, one person said.
While still CFO, Kaeser said he expected to complete disposals of businesses including airport luggage systems, mail automation and water technology in the fiscal year starting Oct. 1. The divestments follow the spinning off of the Osram Licht AG (OSR) lighting unit and the sale of a 50 percent stake in the Nokia Siemens Networks venture.
Siemens had a profit margin of 9.5 percent in fiscal 2012, while ABB and General Electric had margins of 10.3 percent and 15 percent, respectively. The German company’s reorganization costs in the third quarter ended June 30 totaled 436 million euros, with the infrastructure and cities business accounting for 41 percent of that amount and the industry unit for 32 percent.
In August, Siemens’s debt was downgraded by Fitch Ratings, which cited an accelerating decline in the manufacturer’s margins in the most recent quarter and “insufficient progress” on restructuring measures. The appointment of Kaeser as CEO is a “positive development,” it said.
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