business

A Q&A With Siemens CEO Peter Löscher

Shaking off disgrace and a $1.6 billion fine, the German conglomerate aims to build the world's infrastructure, especially in emerging markets

Peter Löscher, 53, the head of Siemens, Germany's largest engineering company, spends as much as 70 percent of his time on the road. "It's the life of a global CEO," he says. These days more and more of his time is spent in China, where Bloomberg Businessweek met with him on the 62nd floor of the Park Hyatt in Beijing, high above the city's plush Chaoyang District.

"We are in China since 1872," says Löscher, an Austrian with salt-and-pepper hair and the build of a former volleyball player. "We have more than 40,000 people in China, 16 R&D centers, more than 3,000 researchers. We are proud when the Chinese premier says Siemens is a Chinese company."

China's boundless appetite for clean energy is the key to Löscher's green strategy, which is to sell every kind of technology, from trains to windmills to solar panels to building controls, that a giant like China—or Brazil, or India, or even the U.S.—could want. In an interview condensed here, Löscher spoke on a range of topics.

A German barometer for the global economy.We are a broad-based infrastructure company, and we focus on three major sectors: health care, energy, and industry. We operate in 190 countries. So we probably are a good barometer, though there are several sectors we simply are not in: telecommunication markets around the world and so forth.

Going global. Siemens is an infrastructure company. And it is absolutely and perfectly tailored for the infrastructure needs of emerging economies. The key thing is that Siemens is the most global industrial company in the world. And it's not just all of a sudden in the year 2010 we found out—ooh, emerging markets is a great opportunity. We are in Russia since 1853, in India since 1868. So in many, many of these key emerging markets we have been there well over 100 years. And if you look into the composition of our global structure, you will immediately find that roughly a third of our product portfolio and our turnover is coming out of emerging markets. We have more than 100,000 people working in emerging markets. [We're] at home in 190 countries of the world.

Three pillars.We have three pillars that we have defined the company around. The first is the aging population around the world, what it means in terms of earlier detection of disease—the whole diagnostic paradigm. The second is energy. And the only company that has a fully integrated energy value chain—from energy generation, transmission, distribution, and consumption—is Siemens. The third is everything around industrial productivity, and that's the major focus, including the whole area of transport systems.

History.The company was founded in 1847 by three brothers. One stayed in Berlin. The second went to St. Petersburg. The third one went to London. At that time these pretty much were the centers of the world. So we were founded as a global company, with one technology: the telegraph. And we moved it from Germany to Finland to Russia, to the Black Sea, across the channel, to India, and in 1872 we arrived in the United States. Engineering prowess combined with entrepreneurial spirit is our founding DNA.

On the Financial Times report that, during a meeting with Chinese Premier Wen Jiabao and German Chancellor Angela Merkel, Löscher, along with BASF CEO Jűrgen Hambrecht, "attack[ed]" China over its protectionist stance. Let me clarify, because it was totally misrepresented in the press. It was an excellent, excellent state visit by Chancellor Merkel with the premier. And we had a very open dialogue between major Chinese companies, German companies, in the presence of the chancellor and the premier. So what subsequently came out was totally misrepresented by people that never participated in the meeting. Quite frankly, everything was around innovation. There is no other country in the world that has seen a transformation like China went through in the last 30 years.

Green portfolio.We are the company with the biggest, deepest, and broadest green portfolio, with the objective by 2011 to hit €25 billion [in sales]. We will surpass this target already by the end of this year. We have more than 100,000 people working on this portfolio. In research and development we are spending every year more than a billion euros [on energy], from a total R&D spend of €3.9 billion. We have 16,000 patents behind this product portfolio, out of a total patent portfolio of 56,000. And it was a major growth driver at the height of the financial crisis. In 2009 our green portfolio grew 11 percent.

Green China.China has a very, very ambitious but very clear energy plan. We just deployed 1,400 kilometers [870 miles] of high-voltage direct current transmission line from Yunnan down to Guangdong, with an overall transmission loss of 5 percent.

By 2050 the target of China is to have renewable energies be 25 percent of their energy mix. As they change their energy mix, we are able to help in all areas.

The Chinese boom.When I was studying at the Chinese University of Hong Kong in 1984 and I was for the first time visiting Shanghai, you saw rice fields, you saw hardly a car. In today's environment, if you take the signage away from Shanghai, it could be anywhere in the world. So the transformation of China is remarkable. Since the WTO access alone, the GDP per capita has grown 226 percent. So I have enormous respect for the changes which are happening.

Bribery scandal and turnaround.Never miss a good crisis. And we certainly didn't miss our crisis. We are extremely proud that Siemens today is recognized today by prestigious external parties like the Dow Jones Sustainability Index as the No. 1 industrial company in the world. And we always say Siemens stands for clean business, every time, always, and everywhere. So we are recognized as a leader in this field—which obviously was one major achievement.

We are communicating a record order book, the biggest order book in the history of the company. Our growth profile is significantly better than many other industrial companies. We will report record profit this year. So despite the big crisis, I am hugely proud of the performance of all 405,000 Siemens workers. And it has proven three things: We have clarity of strategy, clear direction, and we are playing to our strengths.

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