German engineering giant Siemens plans to cut about 7,400 jobs worldwide as Chief Executive Officer Joe Kaeser tries to reduce costs as part of Vision 2020 program.
The cuts, representing about 2 per cent of the Munich-based company’s workforce, may be announced as early as this week. About 3,300 of the job reductions are likely to be made in Siemens’s German operations, according to reports.
“They are mostly white collar employees with higher per head salaries and indirect costs,” London-based JP Morgan analyst Andreas Willi said by e-mail, citing computers and office space as associated costs. The “number makes sense and is in-line with what I expected.”
Last year, Chief Executive Joe Kaeser said that Siemens would face job cuts under his plan to slash about 1 billion euros (1.1 billion dollars) in costs by creating a leaner divisional structure and simplifying regional operations as the company restructures its operations.
“Our Vision 2020 concept will enable us to get our company back on a sustainable growth path and close the profitability gap to our competitors,” Kaeser said, referring to the restructuring program announced last year.
In the entire overhaul, as many as 11,600 positions could be affected and that the final number of job cuts would be negotiated with labor representatives, Kaeser said.
The layoffs come at a time when Siemens’ energy generation divisions and health-care, once the most valued assets at Europe’s largest engineering company, risk imperilling Kaeser’s restructuring plan.
Profit at the two units came down to a combined 27%, overall dragging the first-quarter profit down 4.1% to 1.8 billion euros, the company reported last month.
Still, Kaeser has been giving more emphasis to energy generation and supply, purchasing oil-and-gas equipment maker Dresser-Rand Inc. and the energy operations of Rolls-Royce Holdings Plc last year.
The reduced demand from oil producers suffering from a plunge in the price of petroleum has led some analysts and investors to question the Dresser-Rand deal, which was priced at 14.1 times the average expectation for 2015 earnings before taxes, depreciation, interest and amortization. Since the acquisition was announced, Brent crude has come down about 50% to less than $50 a barrel.
Previously, Kaeser announced a separate 15,000 job cuts in Sept. 2013 and in December a further 1,200 losses at the power and gas division. The company has also sold the hearing-aid, hospital IT and microbiology units. Nearly 18 percent of its 72 billion euros annual revenue is generated by loss-making units, he said last month.