Siemens Slashes Jobs Amid Double-Whammy Power, Wind SlumpsBy
German firm could announce reductions as early as mid-November
Would follow Siemens Gamesa cutting nearly a quarter of staff
Siemens AG’s plan for significant job cuts at its power-and-gas division is set to follow a move by its renewables arm to shed nearly a quarter of staff, laying bare how the transformation of global energy markets is roiling equipment manufacturers.
Talks between management and unions are expected to lead to an announcement mid-November on the elimination of an as-yet-undetermined number of mostly German positions, according to an executive familiar with the matter who asked not to be named because the discussions are ongoing. The Munich-based company’s renewable energy arm, Siemens Gamesa Renewable Energy SA, said Monday it’s eliminating about 6,000 positions.
The wave of job cuts is shaping up to be the biggest since Chief Executive Officer Joe Kaeser slashed 4,500 positions in 2015. The CEO has been whittling down the German manufacturer from a sprawling conglomerate into a more focused producer of industrial goods. He’s planning to spin off the health-care unit and merge the rail business with French rival Alstom SA while the wind power division combined with a Spanish competitor in April.
Siemens shares were unchanged at 123.95 euros at 1:33 p.m. in Frankfurt. Siemens Gamesa stock dropped 6.5 percent to 11.19 euros in Madrid, bringing the drop to about half since the tie up.
The reshaping of Siemens, along with the redundancies, comes as rival General Electric Co. also grapples with weak markets in power, oil and locomotives. The Boston-based company has slashed its cash and profit forecasts while reporting earnings that fell well short of estimates. The German company is scheduled to report earnings on Thursday.
The job cuts at the mother company Siemens come amid a steep drop in orders for large turbines used in electricity plants. Pricing pressure has forced both Siemens and GE to sell the equipment cheaper, according to the Siemens executive.
The company is projecting global power-plant turbine demand to drop to 111 annually on average during the period between 2018 and 2020, compared to 249 in 2011, the person said, adding that the company can produce about 150 turbines per year.
Still under discussion with German unions is how to save some smaller sites by cutting more jobs at larger installations like one in Berlin. The historic site in the German capital employs roughly 3,700 people.
While talks with German worker representatives got underway in May, they were halted after unions balked at the idea of site closures while a large Egyptian order was still being completed, the person said. A roughly two-hour meeting about market overcapacity last month was cut short after union members walked out.
Siemens is getting hit from both sides of the global transformation to more renewable energies. While customers are moving away from ordering large natural gas-fired turbines, moves by governments from India to the U.K. and the U.S. to scale back incentives for renewables has forced manufacturers like Siemens Gamesa to cut costs.
Siemens Gamesa unveiled its job cuts Monday along with earnings, saying it expects a similarly bleak next fiscal year -- a longer slump than analysts had predicted.
German unions have called the impending cuts at Siemens’s power-and-gas division a “massive attack” on the so-called Radolfzell agreement, which they say bars the company from forced layoffs. Siemens management is of the opinion the accord allows for layoffs as long as all other options are exhausted and discussions with workers’ representatives have taken place, the person said.
German Economy Minister Brigitte Zypries has criticized planned job cuts amid political unrest and rising populist sentiment in Germany. Siemens has taken the political considerations into account and is willing to sacrifice a few percentage points in power and gas profit margin in order to save some jobs, the person said.
Bloomberg News first reported significant job reductions at the power and gas unit, and later reported the process industries and drives unit would also be affected. Manager Magazin reported in October that 11 of 23 power and gas sites could be shut or sold off, including one in the east German city of Erfurt.
— With assistance by Brian Parkin