German industrial conglomerate Siemens plans to cut around 4% of its workforce as part of an overhaul and as a result of the global economic downturn, Siemens said on Tuesday.
Siemens wants to cut 16,750 jobs globally, of which 12,600 are mainly in administration, to help Europe’s biggest engineering group reach a savings target of €1.2 billion by 2010 and boost profit margin levels, Siemens said. Another 4,150 jobs will be eliminated through the company’s restructuring program.
CEO Peter Loescher, who has extensively restructured Siemens since taking charge a year ago, said Siemens needed to become faster and more efficient to catch up with the competition. “This takes on special urgency when one considers the economic downturn,” he added. Negotiations with labor representatives about the planned job reductions will begin quickly, Loescher said. Siemens has said it wants to cut selling, general and administrative costs by €1.2 billion or about 10% within two years, partly through reducing the amount of legal entities that make up the conglomerate, which employs about 400,000 people.
The rationalization comes as Siemens struggles to put an end to a worldwide investigation into a corruption and bribery scandal and as it hopes to regain investor confidence after a profit warning in March that sent its shares tumbling. Shares in Siemens were down 1.5% at €69.77 by 1151 GMT, up from a low on the day of 68.53 and compared with a 1.9% fall in Germany’s blue-chip DAX index .GDAXI.
Siemens shares have fallen almost 35% so far this year. By comparison, US rival General Electric has lost 27.4% and Dutch competitor Philips has lost 28.8%, according to Reuters data. Siemens trades at around 7.2 times estimated 2008 earnings while GE and Philips are valued at around 12 and 14 times respectively.
Loescher has promised to slim down the lumbering giant, which makes everything from light bulbs and high-speed trains to medical equipment and turbines, so it can catch up with more profitable rivals and improve its technology. So far, he has regrouped the company’s units into three main divisions aligned with global growth trends: infrastructure and industry, energy, and medical technology.
He has also scaled down the management board to eight from 11 posts. Loescher said on Tuesday Siemens will cut 6,350 jobs at its industry unit, 3,950 at its energy division, and 2,800 at the healthcare unit. (Reuters)