By Irene Preisinger
FRANKFURT, Oct 19 (Reuters) – Siemens may cut thousands of jobs as part of plans to overhaul its power turbine business, where growth in renewable energy is dampening demand for new coal and gas power stations, a person familiar with the matter said.
“Various scenarios are being considered,” the source said, adding that details of the changes at the Power & Gas division were still to be decided.
German monthly Manager Magazin earlier cited company sources as saying that Siemens could shut or sell up to 11 of its 23 Power & Gas sites around the world, which could include plants in the eastern German cities of Erfurt and Goerlitz.
Separately, Bloomberg cited sources as saying that Siemens also planned to restructure its Process Industries and Drives business, which could result in “substantial” job cuts.
Siemens said on Thursday it was continually thinking about its strategic direction, which could include consolidation of some businesses, but declined to say whether it was planning restructuring measures at specific businesses.
Siemens has highlighted weakness at both the Power and Gas and the Process Industries divisions, indicating that restructuring was potentially in the pipeline.
The Power and Gas business is struggling with lower worldwide demand for the large electricity generating turbines that Siemens specialises in, which finance chief Ralf Thomas has said is a structural rather than a temporary problem.
The division reported a 41 percent drop in orders and a worse than expected 23 percent fall in profits in its fiscal third quarter that ended in June.
Process Industries and Drives was Siemens's least profitable business in the quarter, with a profit margin of only 4.7 percent, as it suffered from weakness in demand for the large drives it supplies for power plants.
DRAMATIC CHANGES
The volume of new coal-fired power plant projects dropped last year due to a clamp-down in China and less finance available in India, according to a report in March by Greenpeace, U.S. group the Sierra Club and coal research group CoalSwarm.
There was 570 gigawatts (GW) of coal power capacity in the pre-construction planning stage in January 2017, down 48 percent year-on-year, and projects under construction were down 19 percent at around 273 GW.
“In light of the dramatic changes seen across the global fossil power market, new cost-cutting measures are required (at Siemens) in our view,” Barclays analysts said in a note on Thursday.
They said they expected Siemens to restructure its U.S. plant in Charlotte, North Carolina, as part of an overhaul at Power and Gas.
Excluding its services business, the division has 30,000 employees worldwide, of which 12,000 are based in Germany. Process Industries had about 45,000 employees last year.
Analysts at Berenberg have said they expect that Siemens could ultimately seek to tackle the large gas turbine business by striking a joint venture with a sizeable player, such as Mitsubishi Heavy Industries.
Siemens has already taken steps to break up its lumbering conglomerate structure, including merging its rail business with that of French rival Alstom and the listing of its healthcare business planned for next year.
According to Manager Magazin, management will present the restructuring plan for Power & Gas to labour representatives in early November.
Siemens is due to publish fourth-quarter financial results on Nov. 9. Its rival, General Electric, announces its results on Friday.
(Writing by Maria Sheahan; Editing by Greg Mahlich, Douglas Busvine, Kathrin Jones and Jane Merriman)
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