Siemens to axe 4 per cent of global workforce

08 July 2008

The current economic slowdown has led Europe's largest engineering company, Siemens AG, to plan 16,750 job cuts to reduce €1.2 billion ($1.9 billion / Rs8167crore) in expenses mainly in the sales, general and administration functions by 2010 to raise profitability to the level of rivals such as General Electric Co. and ABB Ltd.

Siemens straddles various diverse engineering and electrical sectors from light bulbs and medical imaging diagnostic products to power systems and trains but generates lower sales and profit per employee than GE, with whom it competes in sectors such as health care and power generation. In 2007 it generated about $12,710 per employee last year, compared with GE's $67,914.

To raise its profiatbility while cutting flab, Peter Loescher, president and chief executive, has extensively restructured Siemens since taking charge a year ago. He wants Siemens needed to become faster and more efficient to catch up with its rivals. He was brought in from US drug firm Merck & Co, to replace Klaus Kleinfeld last year following a bribery scandal that also led to the departure of supervisory board chairman Heinrich von Pierer last year.
In April Loescher first announced the job cuts to reduce costs.

Löscher said  today ''The speed at which business is changing worldwide has increased considerably, and we're orienting Siemens accordingly. Against the backdrop of a slowing economy, we have to become more efficient.'' 

''We want to begin negotiations with the employee representatives quickly in order to make the cuts in a way that will be as socially responsible as possible. In this connection, we intend to consider the full range of instruments at our disposal – for example, transfer companies and part-time preretirement schemes. Only as a last resort will we terminate employment contracts for operational reasons,'' emphasised Siemens' chief personnel officer Siegfried Russwurm.

In November 2007, Siemens announced its intention to reduce sales, general and administrative (SG&A) costs to a competitive level. Against the backdrop of an impending global economic downturn, plans call for reducing costs in absolute terms by €1.2 billion by 2010. Some of these reductions will be achieved by cutting expenditures for IT infrastructure and for consultants.