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By Howard Wheeldon, FRAeS, Wheeldon Strategic Advisory Ltd.

30 Sep 13. Not content with having axed Peter Loescher in July [as an Austrian citizen Loescher had been the first ever non German to be appointed as CEO of Siemens Management Board in 2007] the still mighty Munich based conglomerate announced over the weekend that it planned to cut another 4% of the current 370,000 German and international workforce. Troubled by cost overruns, late deliveries of trains for Deutsche Bahn and Eurostar, problems in its Wind farm business not to mention margins five points lower that GE it seems that as one fire is put out at poor old Siemens another starts somewhere else.

The timing of this somewhat larger than anticipated 15,000 job cut and that is the latest in long round of effort to cut costs might to our eyes appear somewhat strange given that the world economy is now on the up and at a time when the German economy, still the dominant factor in Siemens performance, also appears to be doing quite well. If truth be known apart from the odd better year Siemens has been struggling for the best part of fifteen years. To be fair amongst the huge once far more diversified portfolio of interests much has changed. For a start there was in the late nineties and beyond a radical phase of seemingly sensible acquisition that added huge company’s such as Westinghouse Power and Signal plus the bulk of Mannesmann massive engineering capabilities. During stages the period also witnessed disposal of the high risk Infineon semi-conductor business from the portfolio along with other business activities too and it also saw a narrowing in the number of divisional activities. But for all that the real and underlying problem is that after all the effort Siemens is still unfairly talked of in financial circles as a company that makes just about everything except a profit!

It is true that as one of Germany’s principle company’s Siemens has for years struggled under the weight of trying to be rather too good at everything and not quite good enough to master the world at anything. If that sounds unfair and unreasonable it is not how I mean it to be but the bottom line is that after all the change Siemens is still an engineering conglomerate and it is still far too unwieldy for its own good. For years poor accountability was also a problem and although later addressed I well remember as an equity analyst back around 2001 suggesting that at the heart of Siemens problems was probably ‘eccentric nationalism’. In saying that I was in part referring to over-reliance on the domestic German market and for having consistently failed to make itself sufficiently competitive on the international stage. True, some of Siemens competitors such as Swiss based ABB were struggling with similar problems too but somehow being just that bit smaller and less unwieldy in management structure they sorted their problems out more quickly.

Siemens is often compared with the very much larger US industrial conglomerate GE but you have to strip out the massive GE Capital to see them at comparable size. GE and Siemens compete too particularly in power turbines and healthcare equipment and arguably both may be regarded as not only technology obsessed but also amongst conglomerates, having superb abilities to innovate. But while GE makes a reasonable margin poor old Siemens has an amazing and rather too consistent knack of struggling. I have no doubt that management over the years recognised what needs to be done but I do question if they have sufficient wherewithal to do it and moreover, whether at the heart of Siemens problem and future strategy is the Supervisory board itself.

Whilst Siemens can no longer be accused of having such a sprawling range of activities that it once had and it should be recognised that the two former CEO’s cut slashed what recall used to be eleven divisions to just four – energy, industr

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