Siemens Plans Temporary Shutdown of Power & Gas Division

Siemens, one of the world’s largest turbine manufacturers, said it plans to temporarily shut its Power & Gas (PG) division operations worldwide in an effort to cut costs.

The Germany-based energy giant in a May 7 news release said, “The shutdowns are part of a comprehensive package of measures, which also includes issues such as travel costs, sponsoring, [and] participation in trade fairs and investments.”

Siemens in November 2017 said it would cut 6,900 jobs, mostly in its PG division, and also said it would close some of its manufacturing locations in Europe. The PG division employs about 47,000 workers, according to the company.

The company in its release Monday said it would temporarily shut its PG sites after the Pentecost holiday, a European holiday generally celebrated on the seventh Sunday after Easter. The holiday this year falls on May 20, though Siemens said the closures would depend on “local regulation.” The company in the release said, “Against the background of an ongoing unprecedented downswing in the market for power generation equipment, the power and gas division (PG) is planning temporary shutdowns.” It said the closures would affect “all PG locations worldwide within the current quarter,” and would last for seven days.

Siemens reported its PG division profit margin fell from 12% to 7.6% in its fiscal first quarter, which ended in December 2017. The unit’s target range is 11% to 15%. The company said profits in the P&G division had dropped by nearly half. German media said the PG division accounts for about 18% of Siemens’ overall revenues.

Analysts in a Reuters poll mostly said they expect the company’s struggles will have continued in the fiscal second quarter, or the first three months of this year. The analysts on average expect a 62% drop in profits year-over-year. Siemens is expected to announce its second-quarter results on May 9.

Siemens CEO Joe Kaeser in January of this year said while there would continue to be a global market for gas turbines, it would be smaller, and the focus would move away from Europe. POWER on May 4 reported that Japan-based Mitsubishi Hitachi Power Systems received more than half of all global orders for gas turbines in the first quarter of 2018, far outpacing both Siemens and U.S.-based General Electric (GE), according to research from London, UK-based Barclays Plc. GE has had its own struggles; the company in December announced it would cut 12,000 jobs in its Power division.

At the time of last year’s announcement of job cuts, Siemens said it had experienced a 10% drop in overall profits in its 2017 fiscal fourth quarter, mostly due to slowing sales in its power and wind turbine businesses. The company at the time said the PG unit had noted a 40% drop in profits. Kaeser, speaking at a news conference in Munich at the time, said, “Our power and gas division has been struggling for some time with very difficult market conditions and structural challenges.”

Darrell Proctor is a POWER associate editor (@DarrellProctor1, @POWERmagazine)