Siemens cuts 16,750 jobs as it looks to save $1.9 billion

Of the total job cuts, 1,800 impact engineering positions.

By Suzanne Deffree, Managing Editor, News -- Electronic News, 7/8/2008

Mega conglomerate Siemens AG will cut nearly 17,000 employees as it looks to save $1.9 billion (1.2 billion Euros) by 2010.

The layoffs will include 12,600 administrative jobs, as well as another 4,150 positions involving restructuring projects at its various units, for a total of 16,750 position cuts, equal to about 4% of the Munich, Germany-based company’s current 400,000 global employee base.

Further, Siemens said by 2010 it will consolidate its 1,800 separate businesses to fewer than 1,000 and take its 70 regional companies and transform them into 20 regional “clusters” as part of its restructuring.

“The speed at which business is changing worldwide has increased considerably, and we’re orienting Siemens accordingly. Against the backdrop of a slowing economy, we have to become more efficient,” Siemens President and CEO Peter Löscher (pictured) said in a statement this morning.

The only engineering-specific positions Siemens noted in its statement as impacted are in its mobility division, from which it plans to cut a total of 2,500 jobs worldwide. Some 700 of these jobs are in sales and administrative functions, while about 1,800 are in engineering and production, primarily in Europe, Siemens said.

About 5,250 of the worldwide jobs cuts will be at Siemens’ Germany locations, including its locations in Erlangen, Munich, Nuremberg, and Berlin.

The fact that most of the job cuts 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 begin negotiations with the employee representatives quickly in order to make the cuts in a way that will be as socially responsible as possible,” Siemens’ Chief Personnel Officer Siegfried Russwurm said in the statement. “In this connection, we intend to consider the full range of instruments at our disposal – for example, transfer companies and part-time preretirement schemes. Only as a last resort will we terminate employment contracts for operational reasons.”

Siemens, which makes a range of products, from light bulbs and medical equipment to high-speed trains and power turbines, is no stranger to business restructuring and layoffs. The company in February foreshadowed today’s move when it announced the harsh telecommunications market had caused 3,800 job cuts at its wholly owned subsidiary Siemens Enterprise Communications GmbH & Co KG (SEN) and a restructuring plan that called for SEN to move from being a hardware supplier to a software and solutions provider. At that time, Siemens also announced SEN would give up its own manufacturing operations, selling its plant in Leipzig, Germany, and selling or funneling its telecommunications cable business into solutions involving a third party.

Siemens stock, SI, dipped on this morning’s news. After a Monday close of $109.71, the stock was trading at $108.97 as of 11:28 am eastern.