As expected, the new chief executive of engineering and industrial giant Siemens AG yesterday shook up the company, formally announcing a sweeping reorganization of operations that includes the breakup of its automation and drives business unit. The corporate restructuring is the first major change in how Siemens is organized since 1989.

The new corporate organizational structure devised by Peter Loscher, who became CEO on July 1 in the wake of a bribery scandal that claimed the resignations of a number of top Siemens executives, calls for the formation of what Siemens terms three major "sectors" — Industry, Energy, and Healthcare. Effective in January, the three sectors will encompass 15 divisions.

Previously, Siemens, with €72.4 billion in revenue and 475,000 employees, was organized into nine major areas: Information and Communications, Automation and Control, Power, Transportation, Medical, Lighting, Financing and Real Estate, Affiliates, and Other Activities.

The new, three-sector structure, which Loscher had signaled when he took over in July, has now been formally approved by the company's Supervisory Board. The new Industry Sector will consist of six divisions: Industry Automation, Motion Control, Building Technologies, Industry Solutions, Mobility, and the company's lighting business unit called Osram.

For the first time, according to industry analysts, motion control has been separated from Siemens' huge Automation and Drives business unit and given separate divisional status, perhaps reflecting the impact that the acquisition in May of UGS, the product lifecycle management software company, has had on the automation business. UGS, which was renamed Siemens PLM Software, was made part of Automation and Drives after the acquisition.

The new Industry Automation division includes the former UGS as well as Siemens' manufacturing execution systems and programmable logic controller businesses, according to analysts.

Named to head the new Industry Sector as CEO was Heinrich Hiesinger, a member of the Managing Board of Siemens since July and previously group president of Siemens Building Technologies. Siemens said the Industry Sector accounted for €40 billion in revenue in fiscal 2007 and employs roughly 209,000 people. The company said it anticipates that the Industry Sector's target markets will grow at a 5% annual rate and reach a volume of about €500 billion by 2010.

Siemens said it will announce the heads of the 15 divisions early in December. It was not known at press time whether Helmut Gierse, the current president of Automation and Drives, will be among the new divisional heads. Siemens also said that it will announce new financial targets for the new Industry and Energy Sectors on Jan. 24, 2008 at its annual shareholder meeting. The Healthcare Sector's target margin range was raised earlier this month to a range of 14% to 17%, from 13% to 15%.

As part of the broad reorganization, Siemens also said that it would restructure its Managing Board and reduce its membership to eight people, from 11, effective Jan. 1, 2008. The three new sector CEOs will now be part of this board. A corporate executive committee has been eliminated as part of this reorganization. Siemens noted that Klaus Wucherer, a former head of Automation and Drives, will step down from the Managing Board at the end of the year but will serve as a consultant on the integration of A&D into the new Industry Sector.

In announcing the reorganization, Loscher reiterated objectives he had laid out in July, including increasing the speed at which Siemens does business, improving the company's financial performance, and providing greater public transparency of the company's activities. Today at a press conference, however, he also sought to put the reorganization into a broader historical context.