Wind of change -- Siemens (ETR:SIE) cuts jobs related to oil, gas and mining
An announcement from the German engineering giant Siemens (ETR:SIE) that it is cutting 2,500 jobs related to its oil, gas and mining businesses could be seen as of little significance, given its overall size. It blamed “increasing competitive intensity” in the commodity sector for the cuts.
But for “one of the world’s largest producers of energy-efficient, resource-saving technologies” as it describes itself, the cuts reflect an ongoing rethinking of its business model in the face of market pressures.
“Plunging demand in raw materials markets has led to a significant intensification of competition, particularly in Asia. To guarantee our competitiveness, we’ve got to adapt to these conditions,” said Jürgen Brandes, CEO of Siemens’ Process Industries and Drives Division.
“That’s why we’ve got to optimize our manufacturing network worldwide and reduce the number of facilities producing similar or identical products. We’ve also got to increase the global competitiveness of engineering at our Process Solutions Business Unit,” he added.
The bulk of the job cuts – 2,000 – will be in Germany, primarily in Bavaria. But Siemens also said it expects to hire at least 25,000 new employees worldwide in each of the coming years, with just around 3,000 of them in Germany. These hires are to be part of an expansion into what it calls “a digital industrial company setting the course for innovation and further growth.”
The company recently announced an increase of more than €1 billion ($1.096 bn) in investment in research and development, productivity and global sales.
Siemans' Chief Executive Officer, Joe Kaeser, has also been working hard to restructure their business portfolio to focus on energy generation and distribution.
In January this year it emerged that Siemens was in acquisition talks with Spain’s Gamesa (BME:GAM) in a move that could lead to the creation of the world’s biggest wind turbine maker by market share. In its renewable energy publication Global Wind Market Update last October, FTI Consulting (NYSE:FCN), the global business advisory firm, said the global wind market was headed for a second consecutive record year in 2015.
New installations globally in 2015 were expected to reach 59GW, compared to the 52GW installed in 2014. “Total installations for the 2015-2019 period are now expected to reach 264GW – an increase of 5.6 percent,” it said.
FTI Intelligence estimated firm order intake for the top 10 wind turbine OEMs in the first half of 2015 was approximately 20GW. “Danish-owned manufacturer Vestas (CPH:VWS), leads the intake, driven by near record orders of 3GW in the second quarter of 2015. Chinese companies, Goldwind (HKG:2208) and United Power (ETR:UP7) take second and third place, respectively, by taking advantage of strong market growth in their home market,” says FTI.
Its figures also show that Siemens had a 9.5 percent share of the global wind turbine market in 2014, making it the second-biggest manufacturer after Vestas with a share of nearly 12.5 percent. Gamesa’s share is put at 4.5 per cent. A combined group formed by Siemens and Gamesa would thus overtake Denmark's Vestas as the world's biggest wind turbine manufacturer by market share.
A joint venture between French state-owned Areva (EPA:AREVA) and Gamesa in designing, making and installing offshore wind turbines has been reported by Reuters as being at the heart of the delay on any deal.
The news agency quoted a source as saying that “Areva had not decided whether to sell its stake in Adwen to the potential Gamesa-Siemens wind unit, or offer to buy Gamesa's stake as part of a plan to create a French offshore wind energy champion.”
Dina Medland is an independent writer, editor and commentator with a strong focus on issues around corporate governance, ethics, the workings of the boardroom and sustainable business. She is on the team of contributors to @ForbesEurope and is an ex-Financial Times staff member who has been a regular contributor in recent years. Further details about her background and a portfolio of work – including her commercially sponsored blog ‘Board Talk’ are available on her website http://www.dinamedland.com