Siemens Cutting 1,100 Jobs on Waning Gas-Plant Business

Siemens AG (SIE) is eliminating 1,100 jobs at two energy units in Germany, preparing for years of subdued demand for gas-fired turbines made at its Berlin plant as competition increases and utilities hesitate to invest.

Annual turbine production at the factory has dropped to 30 to 35 units from a normal rate of 45 to 50 turbines, Lennart Kunde, the works-council head at the site, told reporters today. The plant’s capacity utilization, as well as a reduction at other energy operations, will result in 1,100 jobs being lost, said Torsten Wolf, a Siemens spokesman.

“We’ve slipped because the market’s not functioning in the same way that it used to,” Kunde said at a gathering of Siemens worker representatives at the IG Metall union’s Berlin offices. “Many utilities lack the courage to invest,” as Germany shifts energy output from fossil and nuclear fuels to renewable sources.

The gas-turbine factory in the western part of Berlin has been a showcase site for Siemens’s industrial know-how. Chief Executive Officer Peter Loescher chose the location last month to present annual earnings. Munich-based Siemens makes 50-hertz turbines at the facility, while the North American market is served by a factory in Charlotte, North Carolina.

Lost Contract

Kunde said the company is confident it can benefit from rising demand in the U.S. amid a shale-gas production boom, while the European site has been seeking to gain market share in Asia and North Africa. The Berlin plant failed to win a recent contract on a new gas-fired power plant built by Vattenfall SE, which chose a Japanese competitor instead, he said.

Berlin, where Siemens was founded about 160 years ago, remains the company’s largest production hub worldwide, and workers in the city are concerned that management is reversing a push for investments because of a savings program, said Bettina Haller, who represents employees on the manufacturer’s supervisor board.

Fossil power, the division that makes gas turbines, was responsible for 90 percent of the operating profit generated by Siemens’ energy units in fiscal 2012, and 26 percent of the company total, the largest contribution by any business.

New orders at Siemens’s energy operations, which span large gas turbines to windmills, will grow “moderately” in the fiscal year started Oct. 1, Michael Suess, who heads the business, said on Dec. 11. Revenue will decline “moderately” this year, weighed down by the fossil power unit and the expiration of tax credits for wind power investments in the U.S.

Savings Plan

The German company announced a 6 billion-euro ($7.98 billion) cost-cutting effort, dubbed Siemens 2014, in November. Haller said workers are still waiting to hear how the plan will affect jobs as management provides “piecemeal” updates.

The domestic workforce cutbacks at the fossil-power generation and oil and gas divisions are part of the efficiency program, spokesman Wolf said. They also include positions at the conventional island unit, which makes non-nuclear-related equipment for nuclear power plants, and at a business producing technology for coal-fired electricity plants. They add to 1,900 jobs being cut at the company’s power-transmission business and 615 at U.S. wind operations.

Other German units affected by recent job losses are Nokia Siemens Networks and the Osram lighting subsidiary. Osram has lost half its employee base in Berlin since 2009, with about 1,465 remaining, and Nokia Siemens will have eliminated almost 10,000 positions in Germany from its 2007 level by next year, said Irene Schulz, who represents workers at the venture.

“Given those numbers, it’s hard to speak of restructuring, when in reality we’re talking about dismemberment,” Schulz said. “We don’t have a lot of faith left in management.”

To contact the reporters on this story: Benedikt Kammel in Berlin at bkammel@bloomberg.net; Richard Weiss in Frankfurt at rweiss5@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net

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