July 8 (Bloomberg) -- Siemens AG, Europe's largest engineering company, plans to cut 16,750 jobs as it seeks to boost profit margins to the level of its competitors.

Siemens aims to eliminate 5,250 jobs in Germany, Chief Executive Officer Peter Loescher said in a speech handed to reporters today in Munich, where the company is based. The reductions represent about 3.9 percent of the workforce. Another 4,150 further positions will be ``affected'' by the company's reorganization, the CEO said.

Loescher set a target in April to cut 1.2 billion euros ($1.9 billion) in selling, general and administrative costs by 2010 as part of an effort to raise profitability to the level of rivals such as General Electric Co. and ABB Ltd. The economy is ``slowing'', the CEO said today.

``We want to begin negotiations with the employee representative quickly in order to make the cuts in a way that will be as socially responsible as possible,'' Loescher said today on a conference call.

The company will cut 6,350 jobs at its industry unit, 3,950 at energy, and 2,800 at healthcare, the CEO said. Most jobs will be administrative positions. The company's headquarters will lose 800 positions. Siemens said it couldn't estimate the cost of its job cutting plan. Further job cuts weren't ruled out, though the company said it doesn't plan any more at this time.

Siemens, whose products include light bulbs, medical scanners and trains, fell as much as 3.2 percent in German trading today and changed hands at 69.63 euros as of 1:42 p.m. local time. The stock has lost 36 percent this year in Frankfurt trading, cutting the company's market value to 63.3 billion euros. Germany's benchmark DAX index has lost 21 percent in that time.

Worker Relief

``The cuts are a few hundred below what people were talking about, so there might be a slight amount of relief on the worker side,'' said Eerik Budarz, a Frankfurt-based Bankhaus Metzler analyst who advises clients to buy the stock. ``There's a nice savings potential for the coming years if they can achieve the same productivity with fewer workers.''

Siemens generates less sales and profit per employee than peers including GE, which competes with Siemens in industries such as health care and power generation. The company earned about $12,710 per employee last year, compared with $67,914 for each worker at GE, according to data compiled by Bloomberg.

The company reported a 68 percent drop in earnings for the three months through March because of charges for project delays and rising raw-material costs at the power, transportation and technology units.

Economic Clouds

``We see clouds in the economic sky, so we're taking cost measures,'' the CEO said. ``This is a further step to position the company globally.''

Loescher, who has held the top job for a year, cut management layers and pooled nine operating units into three. The 51-year-old Austrian, who joined Siemens from U.S. drugmaker Merck & Co., was chosen to head the company after a bribery scandal led to the departures of predecessor Klaus Kleinfeld and supervisory board chairman Heinrich von Pierer last year.

To contact the reporters on this story: Eva von Schaper in Munich at evonschaper@bloomberg.net; Sheenagh Matthews in Frankfurt at smatthews6@bloomberg.net

Last Updated: July 8, 2008 08:28 EDT