Germany's largest electronics company, Siemens AG, announced Monday its plans to cut 10,000 jobs. The IT services subsidiary SBS would be particularly hard hit: 2,400 jobs, or one in six, would come under the axe.
"It comes down to the long-term stability of this corporation," explained Siemens CEO Klaus Kleinfeld in Munich. "In order to achieve this, it is essential that we cut 2,400 jobs in the next two years in Germany," he said.
The Siemens AG, which employs 160,000 people in Germany, is hoping to cut costs at its problem child Siemens Business Service (SMS) by 1.5 billion euros ($1.8.billion) by 2007. The 63 locations in Germany would need to be cut "on the scale of about 20," according to Kleinfeld. SBS was responsible for 260 million euros in losses in the first 9 months of the fiscal year.
Kleinfeld underscored his goal of making even the struggling divisions perform with profit and growth. Only then could the overall business be successful in creating and securing jobs, he said.
Logistics branch to suffer losses
Angestellte laufen am Montag, 19. September 2005, durch eine Pforte eines Siemens Werkes in Muenchen.Der Siemens-Konzern streicht in Deutschland 2.400 Stellen. (AP Photo/Christof Stache) --- Workers walk through an entrance of a Siemens factory in Munich, southern Germany, on Monday, Sept. 19, 2005. German industrial conglomerate Siemens AG said Monday it will cut more than 2,400 jobs at its computer services unit and reorganize two other divisions to stem their mounting losses. (AP Photo/Christof Stache)
In addition to shutting down one third of the SBS locations, Siemens will also liquidate its logistics dividsion L&A, which has failed to turn profits. Profitable departments of both this division and the struggling Com communications divison will be integrated into other divisions, albeit with significant job cuts.
The distribution and industrial logistics branch of L&A, with 5,000 employees, will be integrated to the independent daughter company Dematic GmbH. The remaining business, with an additional 5,000 employees, will be divided between the divisions Industrial Solutions and Automation Technology.
Following the news of cost-cutting measures, the Siemens stock rose at first, then took a downwards path, ending at 63,70 euro, slightly better than the market average.
Siemens, Germany's largest electronics corporation
IG Metall up in arms
Germany's largest industrial union, IG Metall, lambasted Kleinfeld's savings scheme, calling it a "horror packet". The head of Bavarian IG Metall, Werner Neugebauer, criticized Siemens' "conception-less cost cutting". At Siemens, according to Neugebauer, a sustainable corporate development plan was being increasingly sacrificed in the name of short-term profits.
"To cut costs, you throw the people out, and that then is your concept," said Neugebauer. Wolfgang Müller, who represents IG Metall in the Siemens supervisory board, was estimating yet greater cuts at SBS than orignially announced: 41 of the 63 locations would be shut down, he said.
Economic analysts, meanwhile, praised Kleinfeld's drastic measures, calling it a reasonable plan. A London analyst said, "I think it's a step in the right direction," though it would still be difficult to save 1.5 billion euros by 2007.
Kleinfeld denied accusations that Siemens had delayed the announcement of far-reaching cuts until after the Bundestag election in order to help Angela Merkel and the CDU's chances. His predecessor Heinrich von Pierer appeared in the function of Merkel's economic advisor during the short but fierce election campaign.