Siemens warns of ‘painful’ power unit revamp as orders sink

By BLOOMBERG

MUNICH • Siemens AG CEO Joe Kaeser said he’s planning sweeping cuts at the German engineering company’s power-and-gas business, setting the stage for a turnaround plan aimed at tackling weak orders and a sharp drop in profit.

The unit, which is suffering from a steady decline in demand for large turbines used in power plants, will be “reshaped and redone,” the CEO said in an interview yesterday on Bloomberg TV. “We know what needs to be done. We already have a plan we want to execute on.”

The company is preparing to unveil as early as next week a wave of job cuts at the division, which also includes the Dresser-Rand oil services arm, as well as at the process industries and drives division. Kaeser declined to provide details on how may positions will be affected, although he warned there would be “painful cuts”.

“We’ve understood that old-fashioned conglomerates no longer have a future,” Kaeser said yesterday. “We’ll be looking for a company structure that unites our brand’s powerful ability to integrate and one that’s backed by flexible governance processes.”

Siemens reported industrial business profit slid 10% to €2.2 billion (RM10.74 billion), missing an average estimate of analysts surveyed by the company of €2.45 billion. Profit at the power-and-gas division declined by 40% while orders for new equipment dropped. The process industries and drives division was criticised by Janina Kugel, head of human resources, who said the company is “not happy with the business as it’s currently running”.