Siemens will slash 6,900 jobs equal to 2% of its worldwide workforce with the majority of the jobs lost at its gas and power division, which has suffered from a rapid growth of use of renewable energy.
The majority of job losses, or about 6,100, will be made prior to 2020 at the gas and power division, which at one time thrived by supplying the large gas turbines for generating electricity, but had been hit hard by the surge worldwide in wind and solar capacity.
Siemens’ Process Industries and Drives segment, which makes different size large mechanical drives for gas and oil extraction as well as turbines, will be hit as well, said company officials. The company has not ruled out forced layoffs in its plan.
Aside from its loss-making venture of wind power Siemens Gamesa, the Process and Drives was the least profitable segment for Siemens during the last quarter, with its profit margin dipping to only 2.9%.
Siemens said close to half of its just announced job cuts would come in Germany, a move that will be quite unpopular with local politicians who are currently attempting to form a new coalition government.
The largest Germany trade union IG Metall criticized Siemens management accusing it of having been late in its response to a crisis in the conventional power generation demand and demanded that there be no forced layoffs implemented.
One member of the supervisory board at Siemens said job cuts that are this size are not acceptable given Siemens is sitting in an overall outstanding position.
Economy Minister of Germany Brigitte Zypries urged the company to treat its employees fairly. The minister said workers were concerned as well as uncertain about their futures and she hoped that Siemens would work closely with unions and find solutions that were fair for those affected.
In big contrast, to General Electric its arch rival, Siemens shielded itself from a big downturn in the demand for its large turbines because of a $9 billion order from Egypt in power generations, which help to keep its factories in Germany busy for the last two years.
As that particular order has been fulfilled, both groups are looking at a future with big overcapacity, where the supply is far more than demand at a ratio of 3 to 1, and prices have fallen by as much as 30% since the end of 2014.