Siemens on September 24 said it would cut about 2,900 jobs, mostly from its Power and Gas division in Germany, as it continues restructuring to achieve cost savings amid a tough global market for turbine manufacturers.
Siemens on Monday said the cuts will save the company about €270 million ($318 million) and is part of Siemens’ goal to reach €500 million ($589 million) in savings.
The news comes as Siemens and rival turbine manufacturer General Electric each vie for a $15 billion contract to develop power plants in Iraq. Siemens chief executive Joe Kaeser met with Iraqi Prime Minister Haider Al-Abadi in Baghdad on September 23, and the two discussed a plan to install 11 GW of generation capacity in the country over a four-year period, Siemens said in a statement Monday. The German newspaper Handelsblattconfirmed the value of the contract, citing a person familiar with the talks.
Adel Jeryan, Iraq’s deputy electricity minister, in an interview with the Boston Globe said Siemens has a “high” chance of winning the contract. Jeryan confirmed GE also is in the running for the project. GE earlier this month confirmed it is working on project to develop power generation in Iraq, saying it could double the country’s generation over the next five years.
Barclays analysts on Monday said global demand for large gas turbines is expected to be only about 25% of manufacturing capacity through 2020.
GE last week revealed problems with some of its HA-series turbines, which has sent the company’s stock price tumbling below $12 a share, its lowest level since July 2009. GE, like Siemens in the midst of restructuring its operations, in December 2017 announced it would cut 12,000 jobs in its power unit. The company in August of this year said it would cut 225 jobs at its office in Schenectady, New York; it trimmed 110 jobs at that office in 2017.
GE in June of this year said it would end manufacturing operations at a plant in Salem, Virginia, cutting more than 260 jobs.
Tough Market for Turbine Manufacturers
Lisa Davis, a Siemens executive who has led the company’s Power and Gas group, in a statement Monday about the latest job cuts said, “The market for fossil power generation has contracted substantially. Against the backdrop of this structural change, the agreement we’ve reached is critical to improving our competitiveness.” Davis said the cuts, which also include jobs in the company’s Process Industries and Drives division, will occur over the next two years.
Janina Kugel, a member of the company’s managing board and its chief human resources officer, in a statement said, “In the past few months, market forecasts have again worsened considerably. The job cuts agreed upon with the employee representatives are only one of the measures urgently necessary to improve our cost position.”
The 2,900 jobs are about 500 fewer than the company originally announced it would cut in Germany when it began releasing details of its restructuring plan in November 2017. The company at that time said it would cut 6,900 jobs, about half of them in Germany.
Siemens said it wants to sell a manufacturing site in Leipzig, and restructure a location in Erfurt, moving production of small generators to Erfurt from Berlin. A factory in Mülheimwill become what the company calls its “center of competence” for large steam turbines and also will produce large electric motors. About 600 jobs will be cut at that facility.
Siemens will close a site in Offenbach. Operations at facilities in Berlin and Goerlitz will remain open, though 270 jobs will be cut at the Berlin gas turbine site. The company’s Dynamowerk plant in Berlin will become its global headquarters for large gas turbines, with about 430 jobs lost there.
The company said its site in Duisburg will become the European headquarters for its Dresser-Rand subsidiary. The site will be expanded to become a central service location.
Siemens in August said it would consolidate its five industrial divisions into three companies as part of its restructuring, in what it calls its “Vision 2020+” plan. Details of that plan were first revealed in June. Bloomberg in June said Siemens reportedly was considering a sale of its gas turbine manufacturing business, but Siemens has only said its operations will be restructured.
—Darrell Proctor is a POWER associate editor (@DarrellProctor1, @POWERmagazine).