Siemens AG (SIE)’s chief executive officer said Europe’s largest engineering company will eliminate at least 11,600 positions as it cuts about 1 billion euros ($1.34 billion) in costs.
The planned cuts, which represent as much as 3 percent of the workforce, include 7,600 that will go as the company aims to create a leaner divisional structure, CEO Joe Kaeser told analysts and investors in a webcast conference from New York yesterday. Another 4,000 positions are not needed as the company simplifies regional operations, he said. Some of the employees will be assigned other roles.
“A certain amount of people do stuff for coordinating things, analyzing things,” the executive said. “About 20 percent of those we believe can be put to work elsewhere, but not there. They can be taken out of the system because the work goes away.”
Kaeser’s plan to cut jobs at Munich-based Siemens may anger German unions after he promised the French government this month that he would guarantee jobs there for three years if the company buys the energy assets of Alstom SA. (ALO) U.S. rival General Electric Co. (GE) offered $17 billion for the maker of France’s power grid and promised the government it will create 1,000 jobs in the country.
Siemens, which plans to make a counterbid by June 16, has proposed swapping its trainmaking business for Alstom’s energy assets to create two leading European companies in rail and energy. German union representatives at Siemens this month said such a deal would only be acceptable if the two companies guarantee no job cuts at the units.
Alstom has “a good installed base in gas and in steam turbines,” Kaeser said yesterday. The CEO said he’s keen to find more deals like the agreement this month to buy most of Rolls-Royce Inc.’s energy assets for $1.3 billion. He said that he sees no good reason to buy a robot-maker, prompting shares in KUKA AG (KU2) to decline yesterday as much as 3.4 percent.
Kaeser, who was previously chief financial officer at Siemens, started a strategy review soon after becoming CEO in August as he sought to rebuild investor confidence following missed profit targets under predecessor Peter Loescher. The resulting plan, revealed this month, will establish nine divisions to replace a previous structure around four sectors.
“7,600 people are working for the sector co-ordination, just for the sectors, co-ordinating a middle level which has gone,” Kaeser said yesterday. “Another 4,000 people were doing a regional cluster analysis, which is not necessarily what the customers were needing to see. So by taking out layers of the organization, we not only give more transparency for our businesses to be closer to the board, but also take work out from in the organization.”
Kaeser told employees in a letter today that Siemens will try to find jobs for some of the affected workers in other parts of the company. The reorganization of the company is necessary as businesses representing about “15 billion” in sales are not profitable, he said, without specifying the currency.
Siemens today were little changed as of 4:22 p.m. in Frankfurt, paring the decline this year to 1.6 percent and valuing the company at about 86 billion euros.
The company is negotiating with labor representatives to determine the final number of job reductions. It hasn’t given a timeframe for when these talks might be concluded.
At the time, Kaeser also said the 167-year-old company would focus on electrification, automation and digitalization, and its health-care operations would be managed separately. The new setup will cut about 1 billion euros from costs by the end of 2016, Siemens estimates.
“We do not intend to sell the health-care business but we are flexible in being prepared for anything that comes along,” Kaeser said yesterday. He added that Siemens has invested too much in acquisitions in health-care diagnostics, which include the 2007 takeover of Dade Behring Holdings Inc. for $7 billion.
Siemens is already cutting 15,000 jobs, of which 5,000 are in Germany, as part of a program started by Loescher to save 6.3 billion euros by the end of this fiscal year.
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