Siemens Cuts 7,800 Jobs in Chief Kaeser’s Cost-Cutting Drive

Siemens AG plans to cut about 7,800 jobs, about 2 percent of its global workforce, as Chief Executive Officer Joe Kaeser needs to slash costs at Europe’s biggest engineering company to revive profits.
About 3,300 of the jobs will be cut at Siemens’s German operations, the Munich-based company said in a statement today.

Kaeser said last year he seeks to slash about 1 billion euros ($1.1 billion) in costs by creating a leaner divisional structure and simplifying regional operations. The cuts come at a time when Siemens’ health-care and energy generation divisions, once the prized assets of the company, risk jeopardizing Kaeser’s turnaround plan.

Profit at the two units fell a combined 27 percent, dragging overall first-quarter profit down 4.1 percent to 1.8 billion euros, the company said last month. That’s a far cry from 15 months ago, when those businesses helped offset declines elsewhere at Siemens.

Still, Kaeser has been focusing Siemens on energy generation and supply, buying oil-and-gas equipment maker Dresser-Rand Inc. and the energy operations of Rolls-Royce Holdings Plc last year.

The decline in the price of oil has led some analysts and investors to question the wisdom of the Dresser-Rand deal, which was priced at 14.1 times the average expectation for 2015 earnings before interest, taxes, depreciation and amortization. Brent crude has fallen about 50 percent to less than $50 a barrel since the acquisition was announced.

Kaeser announced a separate 15,000 job cuts in Sept. 2013, a further 1,200 losses at the power and gas division in December, and has sold the company’s hearing-aid, hospital IT and microbiology units. About 18 percent of its 72 billion euros annual revenue is generated by loss-making units, he said last month.

Siemens has risen 16 percent in Frankfurt trading since Kaeser took over, while Germany’s DAX index gained 31 percent.

Source: Bloomberg- by Alex Webb