Siemens Energy wants to eliminate 30 percent of management positions

Munich, Madrid With the consistent restructuring of Siemens Gamesa’s wind energy subsidiary, leaner structures and greater transparency, Siemens Energy Group wants to regain investor confidence. “We want to become faster, more flexible and more customer-oriented,” said CEO Christian Bruch on Tuesday.

In particular, Siemens Energy plans to cut 30 percent of previous management positions. In business areas with up to eleven hierarchical levels, there will be a maximum of six in the future. “Cutting jobs is not the goal of a reorganization,” he said.

Nevertheless, the announcement may cause concern among management. According to Handelsblatt, a three-digit number of managerial positions is to be removed from business circles.

Over the weekend, Bruch announced a cash offer to fully acquire its loss-making subsidiary Siemens Gamesa. With the full integration of a renewable energy specialist, its renovation should make more progress. So far, all efforts to do so have failed. Over three years, the integration will exploit cost synergies of around EUR 300 million.

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Price losses due to problems at Siemens Gamesa

Siemens Energy owns two-thirds of the shares in the listed Gamesa. The acquisition of the remaining stake could cost the parent company more than four billion euros. Bruch has already warned that it would take several years to solve all the problems.

So far, Siemens Energy has not been successful on the stock exchange. From a peak of 33 euros one and a half years ago, the price has almost halved. This is primarily due to the problems of Siemens Games. The traditional power plant business that was once considered a problem child is thriving. On Wednesday, the stock market was not impressed by the announcements, while the share price only increased by 0.4%. up to almost 17 euros.

Siemens Energy is still in the red

To better emphasize progress in other areas, Bruch is now creating more clarity in the numbers. So far, the Group has informed about the course of operations in the division of the power plant “Gaz i Energetyka” and in the area of ​​renewable energy, presenting quarterly results.

In the future, “Gas and Energy” will be divided into the business units “Gas Services” with gas and steam turbines, “Grid Technologies” with electricity transmission and storage, and “Industry Transformation”. The latter include, among others hydrogen related activities, digitization technologies and compressors. “Thanks to our new reporting structure, we meet the capital market’s expectations for greater transparency in business areas,” said CFO Maria Ferraro on the Capital Markets Day.

During the event, business data for new areas were presented for the first time. Accordingly, Gas Services posted sales of approximately nine billion euros and an operating margin (EBITA before special items) of seven percent in the past financial year 2020/21. Network technologies were similarly profitable, with sales of EUR 5.8 billion. The new division “Transformation of Industry” was in the red with a return on sales of minus 2.5 percent and sales of 3.9 billion euros.

The young company Siemens Energy has emerged from a spin-off of Siemens energy technology. The product portfolio includes both the generation of energy from renewable and conventional energy sources, as well as energy transmission and new hydrogen technologies.

So far, Siemens Energy has continued to be in the red. In the past financial year, the net result was EUR 560 million. Sales rose slightly to EUR 28.5 billion.

Also in the new fiscal year, Siemens Energy is losing out due to problems in the renewable energy industry. In the first half of the fiscal year 2022/23, which ends on September 30, the group incurred a loss of 492 million euros.

“It is obvious that jobs will also be lost”

To make a profit, Siemens Gamesa’s reversal must be successful. Even after the complete takeover, the operational problems have not yet been resolved, the supervisory board of Siemens Energy warns.

Gamesa employees in Spain are concerned about a planned total takeover. “The fear is great here,” says Francisco Méndez of the Spanish CCOO trade union. “The group wants to save EUR 300 million a year – it is clear that jobs will also disappear.”

In addition, employees are skeptical that the acquisition makes strategic sense. “Since Siemens got involved, many people have encountered the group as headless chicken,” says Méndez. “One bad decision comes after another and no one knows exactly where the group is going.”

As an example, he cites the closure of a rotor blade factory in As Somozas in Galicia last year. Part of the production was moved to India and part to Portugal. “After that, the cost of transporting the order from India to Egypt soared, and Portugal experienced quality issues that we had already warned about before the closure of As Somozas,” said a trade unionist.

The Spanish trade magazine El Periódico de la Energía also criticizes the German leadership. According to the article, the onshore wind business in which Spain’s Gamesa has been very successful is now more complex. The article says profitability is now zero because Germany never relied on it. “You let him die.”

More: Siemens Energy needs to solve these three problems at Siemens Gamesa

This article first appeared on May 24, 2022 at 8:45 AM.

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