Siemens' radical overhaul threatens thousands of jobs worldwide

German giant Siemens sent shock waves through the industry today after announcing a dramatic shake-up up in which £10 bn worth of businesses will be sold off threatening thousands of jobs.

The radical overhaul, which will cost the company 4m deutsch marks ($2.4bn), was instigated by Siemens chairman Heinrich Von Pierer in response to investor unease about the company's profits and lacklustre share performance.

The news comes soon after Siemens announced the closure of its DRAM chip factory in North Tyneside with the loss of 1,100 jobs. A collapse in the worldwide price of memory chips and intense competition from Asia has caused Siemens' semiconductor business to plunge into the red.

It has now decided to float the business on the German stock market, as well as some of its electrical component businesses. The group is also considering selling off the retail and banking division of Siemens Nixdorf, its computer systems business. A raft of other businesses will also be sold off.

Siemens' underlying net income edged up 2% to DM2.66bn in the year to 30 September. However, the group has had to put aside an extra DM900m to cover a slump in sales associated with the global economic crisis which has hit Siemens' business. The group's problems have been particularly acute in Asia, where revenues has fallen by a quarter.

But despite the drastic overhaul Von Pierer denied that the restructuring would result in the heavy job losses trade unions had feared. While he admitted that some job losses were inevitable, he said the number would not be in 'the thousands'.

Siemens said the divestment would mainly affect German jobs. Von Pierer said that the company would ramp up its focus on the PC and mobile phone business and hinted that the company would announce a major acquisition in the telecoms arena.

Analysts welcomed news of the restructuring plan. Siemens' shares jumped more than 10% on the news.

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