Siemens’ planned €1.2 billion cost cutting took shape this week, as reports surfaced that the German industrial giant will soon slash more than 17,000 jobs.
A Siemens spokesman would not confirm several published articles saying that the company would announce on July 7 that it is axing 17,000 mostly white-collar jobs.
“Right now, we are not commenting on these figures as they are based on speculation,” the spokesman said. “Watch out for more information from Siemens in the days to come.” He said that could mean this week or next.
Siemens CEO Peter Loscher reiterated as recently as last week that the company plans to slash 10% of its “SG&A” (selling, general, and administrative) costs, which include salaries. Asked last Tuesday at a gathering of international journalists in London when the cuts would translate into layoffs, he replied, “I will be in a position, if everything goes well, in a couple of weeks to provide you with further details.”
When Siemens announced a 67% second-quarter profit plunge in late April, Loscher said the company planned to cut administrative costs by €1.2 billion over the next two years, an initiative the company said would include layoffs.
Loscher noted last week that cost cuts will be important as the company faces “a phase of a slowing world economy” and as it strives to grow twice as fast as global GDP. Part of its growth plan involves selling more products and services to oil-rich countries such as Russia, “which actually benefits from an increase in oil prices,” he said, and to other BRIC countries, the Middle East, and emerging markets.
Observers have noted that with 430,000 employees, the €72.4 billion conglomerate should have room forredundancies as it competes against the likes of General Electric, which makes twice as much profit per employee than does Siemens.
The layoffs would dovetail with the company’s stated goal to “take out complexity and simplify the global organization,” in Loscher’s words. That initiative started when the former Merck & Co. executive took the reins at Siemens a year ago and streamlined its many business units into three main sectors — industry, energy, and healthcare. In response to a question from Manufacturing Executive at last week’s media day, he suggested that some of the reductions in overhead would result from fallout of individuals “who are deciding for themselves” whether they want to remain part of the regrouped company.
Heinrich Hiesinger, CEO of Siemens Industry sector, told ME last week that under Loscher’s plan, Hiesinger’s group would bear its proportional share of the cost cutting. The Industry sector employs 210,000 people, about half the company. It sells a wide mix of products, including lightbulbs, automation equipment, variable speed drives, PLM software, and trains. Many of its units have outperformed other Siemens sectors, as manufacturing customers buy goods that make their factories run more efficiently.
“Peter Loscher has set the [cost-cutting] target for Siemens as a whole to about €1.2 billion [in] absolute terms,” Hiesinger said. “And as Industry is 50% of revenues, probably Peter Loscher’s expecting nearly half out of it from our sector,” he told ME in an interview.