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Siemens CEO shakes up company to raise profits

Wednesday, May 7, 2014
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FRANKFURT, Germany — German industrial equipment maker Siemens AG is launching a sweeping restructuring to raise profits and better compete with peers such as General Electric.

CEO Joe Kaeser is eliminating the sprawling company's four broad sectors overseeing its businesses, and will trim those business divisions from 16 to nine. Each division will get a profit margin target as Siemens aims to focus on fields where it can grow and earn the most.

Cutting out the sector level of management will reduce bureaucracy, cut costs and speed up decisions, the company says. Kaeser took over last year after previous CEO Peter Loescher missed several profit targets.

The revamp comes as Siemens is considering making an offer for the power generating business of France's Alstom, which has already received an offer from General Electric.

Kaeser was to lay out details Wednesday at a news conference in Berlin.

The restructuring announcement comes along with the release of what the company called a mixed earnings performance in the first three months of the year, the company's fiscal second quarter. Net profit rose 12 percent to 1.153 billion euros ($1.61 billion). But revenues fell 2 percent to 17.78 billion euros, and new orders slipped 13 percent to 18.43 billion euros. New orders are key to the company's future profits as it delivers large projects with long lead times.

Siemens, based in Munich, makes heavy machinery such as gas- and wind-powered turbines, trains, and medical imaging devices. Other businesses include factory automation and security equipment. It has 359,000 employees, 243,000 of them outside its German base.

The shakeup included a slew of other measures, including the acquisition of Rolls-Royce's gas turbine and compressor business for 950 million euros ($1.32 billion) as the company focuses on what it hopes will be a profitable sector. Siemens also announced it was forming a joint venture with Mitsubishi Heavy Industries to provide plants, products and services for the iron, steel and aluminum industries.

And it will also hold a stock-market offering for its hearing-aid business.

The company said it plans to increase the number of employee shareholders by 50 percent to over 200,000 to create what Kaeser called "a sustainable ownership culture" at the company.

 

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