Siemens cuts 3,800 jobs, plans plant sales

The fact that most of the layoffs and job changes will take place in Germany, a country with very strong employment unions, presents its own set of obstacles for Siemens.

By Suzanne Deffree, Managing Editor, News -- Electronic News, 2/26/2008

The harsh telecommunications market has caused massive layoffs at Siemens Enterprise Communications GmbH & Co KG (SEN).

The wholly owned subsidiary of Munich, Germany-based Siemens AG today announced a restructuring plan that calls for some 3,800 job cuts as it moves from being a hardware supplier to a software and solutions provider. SEN noted the “dramatically changing” telecommunications market for enterprise solutions. Indeed, falling prices and mounting competition from low-cost-labor countries such as China have increased the pressure on European-based telecom players. The company said that the market’s flux has made the transformation “absolutely essential” and that the shift supports Siemens’ ongoing efforts to find a suitable partner for SEN.

“We will begin accelerating the reorientation of SEN and the related restructuring activities under the control of Siemens to ensure that personnel measures associated with these changes will be as socially compatible as possible,” Siemens CFO Joe Kaeser said in a statement.

Planned sales or solutions involving a third party would affect roughly 3,000 employees worldwide, of whom about 1,200 are in Germany, Siemens said. In addition, Siemens plans to cut 3,800 jobs worldwide, including up to 2,000 in Germany. In Germany, SEN’s headquarters and other administrative and support functions are expected to be affected the most.

The fact that most of the layoffs and job changes will take place in Germany, a country with very strong employment unions, presents its own set of obstacles for Siemens. When Nokia in January announced a 2,300-employee layoff on the planned closure of a Germany plant, it faced protests and disapproval from local politicians. And when Ulrich Schumacher resigned his position as CEO of Munich-based Infineon Technologies in 2004, reports pointed to local worker unions as driving the executive’s exit based on Schumacher's management style, views on outsourcing, and comments about possibly moving the company out of Germany. Siemens will also contend with its already tarnished reputation in Germany, where authorities in October 2007 ordered the company to pay fines and taxes of about $538 million after a months-long federal probe into its "black money" scandal.

“We want to immediately begin negotiations with the employee side in Germany about settling interests, and hope to conclude these talks as quickly as possible to give employees the greatest possible certainty about what awaits them in the future,” said Siegfried Russwurm, head of corporate human resources and labor director at Siemens, in the statement.

Reiterating that the planned personnel measures are part of a bundle of activities behind SEN’s transition into a software and solutions provider, Siemens said that more focused investments on product solutions will be continued, and, among other measures, the company’s market position will be expanded in growth markets such as Russia and China.

Further, as it makes its planned changes to a software provider, SEN will give up its own manufacturing operations. In Germany, the company’s plans call for the SEN plant in Leipzig, which currently has about 530 employees, and the telecommunications cable business, with some 60 employees, to be sold or funneled into solutions involving a third party. In addition, SEN is seeking a partnership with an IT provider for around 570 employees involved in direct sales to customers for small and mid-sized systems.

As to its international operations, SEN intends to sell or find partners for its facilities in Thessaloniki, Greece, and Curitiba, Brazil, which have 270 and 470 employees, respectively. Siemens would not rule out the possibility of a facility being closed down. The company noted, however, that order call centers in Argentina, Chile, Colombia, Ecuador, and Peru, which employ a total of about 1,100 people, are not part of SEN’s core portfolio and are slated to be sold.

Globally, Siemens employs about 430,000 people.