November 7, 2017 / 9:13 AM / 8 months ago

Siemens willing to sacrifice profit to soften job cut blow: source

MUNICH (Reuters) - German industrial group Siemens (SIEGn.DE) sees room for compromise to balance the interests of shareholders and employees in a coming massive restructuring of its power-generation unit, a senior manager said.

FILE PHOTO: A logo of Siemens is pictured on a building in Mexico City, Mexico, May 16, 2017. REUTERS/Edgard Garrido/File Photo

The Munich-based group is expected to cut thousands of jobs as demand has collapsed and is unlikely to return for large turbines that have been replaced by renewable energy in Germany and beyond.

News of the likely cutbacks has sparked outrage in Germany, where many Siemens Power and Gas division plants are in the economically deprived east.

The manager, who did not want to be named because of the sensitivity of the issue which has yet to be negotiated with labor representatives, said Siemens would do its best to handle the overhaul in a socially responsible way.

“Maybe you have to give up a percentage point of margin to give people some perspective,” he said, adding that management and labor representatives would likely start negotiations in earnest in the second half of November.

Global demand for large gas turbines has roughly halved since 2017, Siemens estimates, while production capacity is more than three times what the market needs.

Siemens, whose business range from trains to factory software, makes about a fifth of its revenues from its Power and Gas division.

The manager said Siemens could consider keeping plants open in eastern cities and towns such as Erfurt and Goerlitz in exchange for some job cuts in larger centers such as Berlin and Muehlheim in the Ruhr valley where workers have more choices.

The Siemens power unit reported a 41 percent drop in orders and a worse-than-expected 23 percent fall in profits in its fiscal third quarter that ended in June.

Excluding its services business, the division has 30,000 employees worldwide, of which about 12,000 are based in Germany.

Germany’s economics minister Brigitte Zypries has urged Siemens to rethink the planned job cuts, particularly in economically weaker areas of the former East Germany where she says they could spur an increase in right-wing populism.

Chief Executive Joe Kaeser has defended himself, saying Berlin’s abrupt decision to switch to renewable energy caused a structural change in the industry that made the large-turbine business unsustainable in Germany.

Reporting by Georgina Prodhan; Editing by Ludwig Burger and Sabine Wollrab

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