Siemens Will Consolidate Power Divisions, Cut 6,900 Jobs

Siemens has announced it will cut 6,900 jobs, about half of them in Germany, over the next “several years” as the company consolidates its three power-related divisions. The November 16 announcement comes just days after U.S. power giant GE announced its own restructuring plan.

Lisa Davis, a member of Siemens managing board, said in a statement “The power generation industry is experiencing disruption of unprecedented scope and speed,” necessitating changes to the company’s operations.

Siemens CEO Joe Kaeser had mostly confirmed the restructuring plan last week, saying it would be “painful,” after reports surfaced in October that the company would likely cut jobs, close some units, and sell others as it downsized its Power and Gas Division. According to the company’s 2016 annual report, its Power and Gas business employs 48,700 workers and accounts for about 20% of the company’s revenue.

Janina Kugel, head of the company’s human resources department, in a statement said “The cuts are necessary to ensure that our expertise in power-plant technology, generators and large electrical motors stays competitive over the long term.”

The announcement of job cuts drew quick reaction from trade unions, which remain strong in Germany and generally hold half the seats on company advisory boards that must approve major decisions. The IG Metall union in a statement called Siemens’ plan “a broad-based attack on employees.”

Union and worker representatives walked out of an October meeting with company executives when management discussed the market conditions behind the restructuring, according to Bloomberg. In a statement November 16, Juergen Kerner, a union representative on Siemens’ supervisory board, said “Job cuts on this scale are totally unacceptable given the excellent overall situation of the company,” a situation noted in a company presentation during an August 2017 call with analysts.

Siemens in a statement said 6,100 of the job cuts will come in the Power and Gas Division, with other cuts affecting its process industries and drives unit, and its power generation division. The company said about 300 jobs would be cut in Berlin, and about another 640 jobs at its site in Muellheim will be eliminated.

Both Siemens and GE have faced less demand in recent months for their turbines and other equipment as generators increase their use of renewable energy.

In a news release, Siemens said its “consolidation” will “increase capacity utilization at production facilities, drive efficiency and enhance expertise by bundling resources.

“Global demand for large gas turbines (generating more than 100 megawatts) has fallen drastically and is expected to level out at around 110 turbines a year. By contrast, the technical manufacturing capacity of all producers worldwide is estimated at around 400 turbines.”

Munich-based Siemens said it will close its locations in Goerlitz and Leipzig, and combine the operations of its Offenbach and Erlangen offices. The company said it is considering options, including a sale, of its location in Erfurt. It said about 2% of its 370,000 workers worldwide would be affected.

Siemens’ announcement comes just three days after GE CEO John Flannery said “The GE of the future is going to be a more focused industrial company” as he spoke at the company’s investor day November 13. “It will leverage a lot of game-changing capabilities.”

Flannery said GE would be more focused on energy, aviation, and health care moving forward. The company has divested assets since Flannery took charge in August 2017, selling its Water and Process Technologies Division to multinational water management firm SUEZ in a $3.4 billion deal, just days after announcing a $2.6 billion deal to sell its electrification business to ABB. Company investors have pressured GE to cut costs, and Flannery apologized to investors for the company’s performance during his November 13 presentation.

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