Exclusive: Siemens To Keep Most Underperforming Divisions – Source
German industrial firm Siemens (SIEGn.DE) plans to keep most of its 13 underperforming businesses for now and will try to sell a handful of “marginal” operations, a source with direct knowledge of the matter told Reuters.
Siemens said late last year it would decide by May what to do with the businesses it has identified as problems and that account for 18 percent of sales, or some 13 billion euros ($15 billion), and no profit.
The source said Siemens would try to sell three to five small divisions, such as industrial waste water treatment, which require expertise that does not fit with Siemens’ electrical competence, or operations that will cost too much to fix.
“These are marginal things,” the person said. “The core businesses will be restructured.”
Siemens, which has not disclosed what the 13 businesses are, declined to comment.
Once a sprawling engineering group with businesses from trains to turbines to hospital IT to hearing aids, Siemens is being streamlined by new Chief Executive Joe Kaeser.
He wants to focus on Siemens’ strengths in electrification, automation and digitalization and close a profitability gap with arch-rival General Electric (GE.N).
A second source familiar with the matter said Kaeser wanted to prove Siemens could turn around unprofitable businesses by itself.
The decision is due to be taken at Siemens’ supervisory board meeting next Wednesday before it presents second-quarter results on Thursday, the first source said.
Siemens is aiming for an industrial profit margin of 10-11 percent in its current financial year under a new way of defining its profits. The margin was 10.2 percent in its first quarter to the end of December.
The company has said a 10-11 percent margin will be a clear improvement on its previous financial year but has not given a comparable figure.
That compares with an industrial margin of 16.2 percent at GE last year and Swiss engineering group ABB’s (ABBN.VX) 13.5 percent operating margin.
Siemens is also restructuring its power and gas unit, where profits have collapsed due to price pressures in gas and steam turbines. They are becoming unprofitable for operators in many markets due to a rise in renewable energy and lower demand.
It is cutting at least 1,200 jobs in this area and trade union IG Metall fears there will be thousands of job cuts in Germany over the coming years. Siemens employs 343,000 staff worldwide, a third of whom are in Germany.