The CEO of German engineering giant Siemens has been forced to step down. Is the sacking of Peter Löscher the result of in-house scheming, or does it just reflect his limited success?
Siemens chief Peter Löscher, who had been at the helm of the company for six years, had to step down on Wednesday.
"At its meeting on July 31, the supervisory board will decide on the early retirement of the chief executive," the company said in a laconic statement last Saturday. It cited consistently weak returns as the reason for the move. When Löscher was recently forced to revise down the company's 2014 profit forecast, the supervisory board clearly felt that steps had to be taken.
Leaving with a caveat
The 55-year-old Peter Löscher had said there'd be a string attached to his departure - he wanted to take the head of the supervisory board, Gerhard Cromme, down with him. But nothing came of it.
"The board itself decides who is its head," business lawyer Daniela Bergdolt told public broadcaster ARD. "When the CEO demands such a change, it's like ignoring the actual legal situation."
But Löscher's demand seemed typical for the management style of a man behind the many ups and downs of the company in recent years.
Scenes of a friendship
Back in 2007, it was Gerhard Cromme who brought Peter Löscher to Siemens, making the latter the firm's first CEO from outside the company. Siemens at the time was embroiled in one of the biggest-ever corruption scandals in German business. Bringing in a broom from outside the firm seemed the best solution to those internal problems. Löscher, the Austrian CEO of US drug company Merck, was invited to do some cleaning up at Siemens.
The smart and cosmopolitan man looked like the right person to help the crisis-hit tech giant. He'd studied in Vienna, Hong Kong, and Harvard, before making a name for himself in various pharmaceutical companies, including Hoechst and Aventis. Siemens was pinning major hopes on him, banking on his international experience and his knowledge of the US market. Löscher was expected to break up encrusted in-house structures, free of longstanding networks.
Blunders, bad luck and losses
But after implementing a successful crisis management strategy in 2008 and 2009, Löscher soon began producing negative headlines, pushing ahead with growth forecasts too ambitious to live up to.
"It stands to reason that we aspire to meet the ambitious targets we've set ourselves," is one of many similar Löscher statements. He said Siemens should occupy a top position among its competitors, adding that he was no friend of mediocrity.
But he wasn't able to deliver on his promises. During his time at the helm of the company, shares dipped by some 20 percent. In the spring of 2011, Löscher announced a turnover target of 100 billion euros ($132 billion) and a 12-percent yield, but again failed to deliver. The company's main competitor, General Electrics, did meet the 12-percent target that year, but Siemens had to make do with just 7 percent. Analysts commented Löscher had wrongly assessed cyclical developments in crucial markets.
Siemens wasn't too successful in investing in solar industry either. The firm had to wind down its solar business completely, with the expensive acquisition of Israel's Solel proving a financial disaster. Moreover, German rail operator Deutsche Bahn is still waiting for ICE high-speed trains that Siemens promised to supply, but hasn't so far because of faulty electronic components.
"Some of our projects haven't quite unfolded the way we wanted," Löscher admitted during an annual shareholder meeting.
Business lawyer Bergdolt says the strategy of delaying a little each time was suspect, with consecutive profit warnings remaining unexplained. She said Löscher had moved away from his overambitious targets only gradually - one of the reasons for his sacking.
In addition, he always remained "an alien in the company", Bergdolt maintained. In-house support for him has been waning fast, not least because of his "Siemens 2014" cost-cutting program, which involved layoffs. "Peter Löscher failed to develop a real vision and rally the workforce behind him," Bergdolt concluded.
Succeeded by a schemer?
Löscher himself spoke of an "infamous plot" against him when talking about his fate. At least that is what he was reported to have said to a small number of people. The man following him is is Joe Kaeser - in Löscher's eyes a schemer. The 56-year-old head of Siemens' financial department assisted Löscher in working out the 12-percent-yield target, but later described the target as too risky before the supervisory board.
Some observers doubt whether he'll be the right man to put the company back on track. "Looking at the way the change of guard has been managed, you can see there's no long-term plan," German economic expert Christoph Kaserer told public broadcaster ARD. He said no one would have to make such an important decision within three days.
"Siemens doesn't only have structural problems, it has a problem with its supervisory board, too," Kaserer concluded.