Siemens (SIEGn.DE) Chief Executive Joe Kaeser applied the finishing touches to his overhaul of the German industrial group with the announcement on Friday of 7,800 job cuts designed to streamline management and speed decision-making.
The roughly 2 percent cut to the trains-to-turbines group's global workforce will generate productivity gains of about 1 billion euros ($1.14 billion) by the end of 2016, Siemens said, as the company strives to close a profitability gap with rivals such as General Electric (GE.N) and Switzerland's ABB (ABBN.VX).
The profit margin at Siemens' industrial businesses fell to 10.2 percent in the past quarter, from 11.3 percent a year earlier, against 14.3 percent at ABB and 18.6 percent for GE's industrial division.
"This completes the restructuring of our company," said Kaeser, who took over in a boardroom coup in 2013 and outlined his vision for the company in May last year.
A senior company source said that the group's portfolio restructuring is also mostly complete.
Since Kaeser took over, Siemens has agreed to buy U.S. oilfield equipment maker Dresser-Rand (DRC.N) and the turbines division of Rolls Royce RRL.L. On the disposal side, it has shed its hearing-aids unit, exited its BSH household appliance joint venture [ROBG.UL] and is hiving off its healthcare operation as a standalone business.
REINVESTING
Siemens said it would reinvest the billion euros of productivity gains in the growth areas of supplying electricity for industrial projects, automation and digitalization, 800 million euros of which will be split evenly between sales operations and research and development. The rest will be invested in fixed assets.
About 3,300 of the jobs cuts, which Siemens said should be completed within two years, will be in Germany, where the company employs 115,000 people. Siemens pointed out that it had hired more than 11,000 people since the start of its financial year in October and said it would avoid compulsory redundancies.
The company source said the restructuring costs for the job cuts would be in the mid-to-high hundreds of millions of euros.
Siemens, the products of which once included nuclear power plants, personal computers and semiconductors, has shed more than a dozen businesses since the turn of the century, many in the consumer sector where it struggled to connect with customers or where margins were driven down by Asian competitors.
At its height in 2001 Siemens employed almost half a million people and had annual sales of 87 billion euros. At the end of the past financial year, its 343,000 employees generated sales of 72 billion euros.
A source familiar with the matter had said on Thursday that Siemens planned to cut more than 7,000 jobs.
Siemens shares were down 0.8 percent at 95.57 euros by 1046 GMT, in line with Germany's blue-chip DAX index .GDAXI.
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