Siemens to Cut 6,900 Jobs in Restructuring -- Update

By William Boston Features Dow Jones Newswires

German electrical engineering giant Siemens AG on Thursday said it would cut 6,900 jobs worldwide in an effort to consolidate three of its core business.

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The cuts will affect its power-and-gas division, power-generation services division and process industries and drives division, the company said.

The move by Siemens comes amid a broader slowdown in the global power-plant industry as companies, including rival General Electric Co., grapple with falling demand in their core power businesses.

Chief Executive Joe Kaeser hinted at the restructuring last week when he presented the company's annual earnings, saying the power-and-gas division was struggling for some time. The firm is contending with a shift away from big coal, gas and nuclear plants that need lots of its equipment to smaller alternatives such as wind and solar that don't require as much industrial machinery.

"If this business is going to have a future, then we have to react," Mr. Kaeser said at the time "We have to adjust capacities, even if that means painful cuts."

On Thursday, the company said demand for large gas turbines generating more than 100 megawatts has fallen to about 110 turbines a year. Siemens said that worldwide the company and its competitors can produce about 400 of these turbines per year.

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The move by Siemens comes on the heels of a decision by GE to halve its dividend and launch a sweeping restructuring to make its businesses leaner and more focused. GE's new CEO John Flannery told investors earlier this month that 2018 would be a "reset year."

In the year to Sept. 30, Siemens generated revenue of EUR84.3 billion ($99.4 billion), an increase of 4% from a year ago, and profit of EUR9.4 billion, up 8%. However, the power-and-gas business weakened, with profit falling and orders down 31% to EUR13.4 billion.

Together, the power-and-gas division and the drives unit -- which makes gears and turbines used in power plants -- account for nearly 30% of Siemens's total revenue.

Overall, the company has 351,000 employees.

Siemens faces stiff opposition to any job cuts from the powerful IG Metall union, which is also represented on the company's supervisory board as is the case at many of Germany's biggest industrial companies.

Jürgen Kerner, a senior union official who sits on the Siemens board, said this week that workers would begin strategies for "a path of creative resistance" to the company's plans.

Siemens executives began laying out their plans in a closed-door meeting with Mr. Kerner and other labor officials on Thursday.

"The cuts are necessary to ensure that our expertise in power-plant technology, generators and large electrical motors stays competitive over the long term," said Janina Kugel, the company's chief human resources officer and a member of its managing board.

"We can reach this goal only if we find answers to the worldwide over-capacities and the resulting price pressure," Ms. Kugel said.

Write to William Boston at william.boston@wsj.com

(END) Dow Jones Newswires

November 16, 2017 10:22 ET (15:22 GMT)