Siemens announces layoffs of approximately 10,000 people, divesting energy business

Siemens’ huge power division, which includes its gas turbine business, has long been Siemens’ core business. Fossil fuel-focused Siemens has struggled for years due to a rapid shift toward renewable energy in its core market and fierce competition from wind and solar power systems.

In the last fiscal year, Siemens’ GP unit profits fell sharply by 76% to 377 million euros. In contrast, profits from the renewable energy sector increased by 43% to 483 million euros. Another giant, General Electric, had faced similar difficulties before. In the past two years, GE has fired two CEOs, cut its dividend twice and written down $23 billion in assets.

Siemens CEO Joe Kaeser said that some competitors have recently "experienced situations where they had no choice" and that he needs to be proactive to avoid this fate. This is obviously a reference to GE.

The day before it announced its quarterly financial results, Siemens announced that it would merge its natural gas and power divisions with its renewable energy business. The announcement shows that Siemens' natural gas and power (GP) business - including Siemens' oil and natural gas, conventional power generation, power transmission and related services businesses - will be spun off and plans to IPO before September 2020.

Siemens stated that after the spin-off of the natural gas and power divisions, Siemens will retain less than 50% of the shares of the new company after the spin-off, and will control a majority stake in its renewable energy companies. , this is expected to create what Siemens CEO Joe Kaeser calls "a strong single operation in the energy and power sector", providing products for the entire energy market from a single source.

Joe Kaeser said: "Siemens' various departments should operate like a 'fleet' rather than bulky tankers."

In fact , the spin-off of the GP business is part of the 2020 Vision + Strategic Concept Plan adopted by Siemens in this announcement. The entire plan focuses on adjusting business direction and streamlining the organization to increase the company's profit margins. In this plan, Digital Industries (DI) and Intelligent Infrastructure (SI) operating companies will form SiemensThe industrial core of the future.

Joe Kaeser said that Siemens hopes to achieve great development in growth markets such as automation, industrial digitalization and intelligent infrastructure.

As for cost reduction, Siemens said that the company plans to improve cost efficiency in all areas, with the goal of increasing the revenue growth rate and profit margin of the company's industrial business by two percentage points in the medium term. In the long term, the industrial core business profit margin (adjusted EBITA profit margin) will reach 14% to 18%.

Siemens predicts that by 2023, it will recruit 20,500 new people and lay off 10,400 people, which is a net increase of about 10,000 jobs. The main departments involved in new positions and layoffs include SI, DI and functional departments. As of the end of last year, Siemens had approximately 379,000 employees across the country. The newly planned energy efficiency improvements will result in a total cost reduction of €2.2 billion by 2023, a figure that includes the €500 million target of the GP cost reduction plan announced in September 2018.

　(Original title: Siemens announced layoffs of about 10,000 people and divested its energy business)