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Siemens CEO Kaeser Cuts 15,000 Jobs to Catch Up With GE & ABB

30 September 2013

Siemens AG’s new Chief Executive Officer Joe Kaeser will cut more jobs than initially planned to boost earnings after the failure to catch up with rivals General Electric Co. and ABB Ltd. cost his predecessor the job.

The company will eliminate 15,000 jobs, representing 4 percent of its 370,000 workers worldwide, and a third of the cuts will come in the German home market, Siemens spokesman Oliver Santen said by phone yesterday. He declined to give more regional details. Siemens, Europe’s largest engineering company, had initially planned some 8,000 job cuts globally, a person familiar with the program told Bloomberg in October.

Former CEO Peter Loescher lost his job following a July 25 announcement that the Munich-based company wouldn’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,” London-based JPMorgan Chase & Co. analyst Andreas Willi, who rates Siemens shares neutral, said by phone yesterday. “There have been charges in drive technologies, power generation and transmissions, so you expect them to bear the weight.”

60 Units

Siemens, which has 60 sub-units and manufactures products including trains, gas turbines, medical scanners and factory automation gear, predicts one billion euros in charges for 2013 associated with the so-called “Siemens 2014” efficiency program, it said in July, raising the figure from an earlier 900 million-euro estimate. Kaeser told analysts at the time the costs could be a further 100 million euros.

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.

Kaeser, who was promoted to lead the company in August after working as chief financial officer for seven years, is working to regain investor confidence after five forecast cuts and a 22 percent stock decline in his predecessor Loescher’s six-year tenure.

Internal Predictions

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.

Siemens on Friday dropped 0.4 percent to 89.83 euros in Frankfurt trading, valuing the company at 73 billion euros.
While still CFO, Kaeser said he expected to complete sales of units 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 lighting unit and the sale of a 50 percent stake in Nokia Siemens Networks.

Siemens had a profit margin of 9.5 percent in 2012, while ABB and General Electric had margins of 10.3 percent and 15 percent, respectively.

In August, Siemens’s credit rating was downgraded by Fitch Ratings, which cited an accelerating decline in the company’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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