German industrial group Siemens has announced that it is cutting an additional 4,500 jobs across its global operations.
The latest decision has been brought about as weak demand and a drive for more renewable power have affected the energy businesses of Siemens which account for about 40 percent of its sales.
Further, sluggish economic growth in major markets of the company has led to a drop in infrastructure spending, affecting its business.
The current downsizing takes the number of jobs cut by Siemens since last December to 13,100, which is about 4 per cent of the company’s workforce.
Last September the company had announced plans to cut 15,000 jobs across operations as part of its restructuring plan.
Of these, 5,000 jobs were to be cut in Germany. Similar measures could follow as Siemens CEO Joe Kaeser seeks to achieve savings of 1 billion euros by next year.
Siemens has not revealed details of its underperforming businesses. It has stated that it preferred to deal with the problems in private and announce the results later.
According to a report, though, mechanical drives, compressors and transformers were among the poorly performing businesses of the company.
Siemens had earlier announced it was cutting 7,400 jobs after the company’s profits in its industrial businesses dipped by 5 percent during the first quarter.
At present the company employs about 340,000 people worldwide, including about 115,000 in Germany.
While the company has not disclosed the geographical distribution of its latest austerity measure, some reports suggest 2,200 jobs could be cut in Germany alone.
Kaeser, the CEO, has been under pressure from investors to cut costs after he decided to spend $7.6 billion to acquire US oil and gas equipment specialist Dresser-Rand.
He hopes to make the company competitively profitable alongside rivals General Electric and ABB through such cost cutting measures.
Siemens was targeting 10-11 percent of profit margin from its key industrial businesses this fiscal. But it fell to 9 percent in the first quarter from 10.3 percent a year before.
General Electric achieved 14.6 percent industrial margin and ABB showed 13.5 percent operating margin for the same period.
Even while jobs are being cut, Kaeser has also decided to retain underperforming businesses, which account for $16.9 billion of Siemens’ business. They would be in sales but with zero profit.
As part of the restructuring, Siemens had also started to hive off its healthcare business and recently fired a host of senior managers.
The going has been tough for Siemens’ power and gas division as it has had to cope with factors including regulatory changes, massive price erosion, aggressive competitors and regional overcapacities.
The company has expressed hope that it would attain at least the lower limit of its targeted industrial profit margin of 10-11 percent supported by the new cuts.
Siemens retains some hope for the coming quarters as it anticipates market conditions in China and the United States to improve in the second half of the fiscal.
Ajith Kumar S