(Bloomberg) -- Siemens AG announced the most sweeping round of job cuts in years with a plan to eliminate about 6,900 positions worldwide and close factories, as Europe’s biggest engineering company grapples with a sharp drop in orders for power-plant equipment.
Half of the cuts will be in Germany, where Siemens is shuttering two facilities in the eastern part of the country and putting the future of others under review, the Munich-based company said in a statement on Thursday. It has said the revamp, which will affect about 2 percent of its 372,000 employees, is inevitable amid global manufacturing overcapacity for power and gas turbines.
The reductions come less than two months after German general elections, during which Chancellor Angela Merkel ran on a platform of economic stability. Siemens, among the country’s biggest corporate employers, has reshaped its conglomerate structure over the years in a bid to become more nimble, ahead of U.S. rival General Electric Co., which is undergoing a steep transformation of its own.
The plan to cut jobs sets the stage for a clash with worker representatives such as trade unions, which hold powerful sway at German companies because they make up half of the supervisory board that signs off on major strategic decisions. In a first reaction, the IG Metall union called the plan a “broad-based attack on the employees.”
The cuts are part of Chief Executive Officer Joe Kaeser’s broader push to streamline the company, which has included merging its renewables unit with a rival, withdrawing from a historic lighting business, and the planned listing of its health-care division. The job reduction plan also fell the same week as GE unveiled its own turnaround plan to focus on three businesses and exit others. Both conglomerates are facing global shifts in energy demand favoring renewables over large fossil-fuel plants powered by the types of turbines they manufacture.
At Siemens, 6,100 of the jobs targeted for elimination are in the power and gas division, with the rest coming in the process-industries-and-drives and power-generation divisions, according to Thursday’s statement.
“The cuts are necessary to ensure that our expertise in power-plant technology, generators and large electrical motors stays competitive over the long term,” Janina Kugel, head of human resources, said in the statement.
The shares ended 0.9 percent higher at 115.80 euros in Frankfurt, taking the market value to 98 billion euros ($115 billion).
The company’s Goerlitz and Leipzig sites are slated to be closed, while options including a sale are still being considered for a site in Erfurt, Siemens said. About 640 jobs will be cut at an installation in Muellheim, and another 300 in Berlin.
The future of Siemens’s solutions business at the Offenbach site near Frankfurt is uncertain after the company said it would be combined with operations at Erlangen, where Siemens has large installations. An internal memo seen by Bloomberg News says the Offenbach site is also scheduled to be closed. Kugel declined to confirm this during a call with reporters, saying “it will be made clear in the process of the negotiations.”
The German company has been in talks for months with unions about the plan, which Kaeser broadly confirmed last week, saying it would be “painful.” Union and employee representatives walked out of a meeting with Siemens in October when management explained the market conditions behind the cuts.
“Job cuts on this scale are totally unacceptable given the excellent overall situation of the company,” Juergen Kerner, the union’s representative on Siemens’s supervisory board, said in a statement.
Siemens has pointed to a sharply deteriorating situation in the market for large power and gas turbines, saying global demand is expected to level off around 110 a year compared with an overall manufacturing capacity of around 400.
Siemens’s last major round of cuts was in the process-industries division, where 1,700 positions were cut after negotiations with unions.
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