German engineering giant Siemens announced Tuesday, July 8, it will cut almost 17,000 positions from its global workforce in an effort to streamline operations amid a worsening business climate.
Siemens says it has to become more efficient
Siemens plans to slash 4.2 percent of its global 435,000-strong workforce. Most of the cuts will be in administration and management services, the company said. They are part of a plan to reduce in overhead costs by 1.2-billion-euro ($1.8 billion) over the next two years.
Besides 12,600 cuts, another 4,150 positions will be affected by restructuring plans at various Siemens units.
"Our aspirations are clear, we want a lean administration in a growing company," said CEO Peter Loescher.
The restructuring plan comes as Munich-based Siemens struggles to bolster its profitability as it deals with soaring energy prices and a far-reaching corruption scandal that could burden the company for years to come.
In Germany, Siemens said about 5,250 workers will lose their jobs. The company employs approximately 136,000 in Germany.
Blamed on business climate
Loescher blamed the cuts on a slowing economy, saying the company had to become more efficient.
"The speed in which the global business is changing has greatly accelerated," he said. "We have to adjust to it accordingly."
The 160-year-old company is facing severe storm clouds are several fronts. Besides the job cuts, there are scares of a sharp downturn in business, the ongoing investigation into corrupt practices, to rumors of a fight over the future direction of the company.
Siemens' second-quarter net profit slid 67 percent, weighed down by weaker performance in its major business projects
After Loescher took over from CEO Klaus Kleinfeld, who resigned amid the corruption revelations, he announced plans to split the group into three division to improve the company's corporate structure.
Siemens is cutting 4.2 percent of its global workforce
Loescher said the job cuts would be carried out "in as socially a responsible way as possible." Chief financial officer Siegfried Russwurm said the company will pursue measures such as transitional companies that could provide job training, buy-outs or semi-retirement.
He did not rule out forced lay-offs, although he said that would be "the last resort." The Siemens board has said it wants to begin negotiations with employees' representatives immediately.
In the days leading up to the announcement, Siemens union leader Werner Moenius was critical of the cuts, calling the plans a "catastrophe" that had been "dropped like a bomb." Unions have warned of strike action if the planned domestic cuts are carried out.
On Tuesday, employee representatives and local politicians in Erlangen and Nuremburg, two locations that will bear the brunt of the cuts in Germany, reacted with outrage at the news. "This is unacceptable for a company that has sales in the billions and order books that are overflowing," Wolfgang Niclas, head of the IG Metall union in Erlangen, told the DPA news agency.