Crossing the "Big Pond" 

The History of Siemens in the USA

 

It all started with a key reassessment. In 1881, Werner von Siemens came to realize that the U.S. market would be significant for his company. In Chicago ten years later, Siemens opened its first U.S. production facility. More than a century after that, the company founder’s intuition had been borne out through and through: by 2001, Siemens had become the country’s largest non-U.S. investor in electrical equipment and electronics. And for the first time, the company’s activities in a foreign market had outperformed operations in Germany. Today, the USA is Siemens’ most important market, and a cornerstone of the company’s worldwide success. 

The beginnings – Werner von Siemens realizes the American market will be significant 

In May 1881, Werner von Siemens wrote to his brother William that it would be “really a sin” to overlook the American market. Late in life, the founder of the company known as "Telegraphen-Bauanstalt von Siemens & Halske" had become persuaded that no country on earth held greater market potential for his firm. Granted, Siemens & Halske had had contacts with American businessmen as early as the 1840s. 

 

But its activities, at that time and ever since, had been limited mainly to filing patents, making license agreements, and delivering a few niche products. 

 

Now, in 1892, Siemens built its own production facility in Chicago, and from 1908 to 1941 maintained a small office in New York as well. The German company also expanded its business contacts with U.S. market leaders General Electric (GE) and Westinghouse Electric Corporation (generally known simply as Westinghouse).

Partnership instead of competition – Siemens works with Westinghouse

Siemens especially maintained a lasting partnership with Westinghouse from 1924 onward. Founded in 1886 and operating in power technology just as Siemens did, Westinghouse signed a cooperation agreement with Siemens-Schuckertwerke on October 17, 1924, that provided for a regular exchange of patents and know-how.

 

Siemens especially maintained a lasting partnership with Westinghouse from 1924 onward. Founded in 1886 and operating in power technology just as Siemens did, Westinghouse signed a cooperation agreement with Siemens-Schuckertwerke on October 17, 1924, that provided for a regular exchange of patents and know-how. 

 

The cooperative arrangement was a particular gain for Siemens – because as had been the case for other German companies as well, World War I and the restrictions imposed by the Treaty of Versailles had caused it to fall behind international technological developments in power engineering, and also cost it its former market positions abroad. The cooperation agreement would help remedy these handicaps.

 

Yet despite its fruitful understanding with Westinghouse, for the time being Siemens was still unable to tap permanently into the U.S. market. Up to 1945, the company had got no further than working its patents and doing a limited business in specialty articles.

A new start – Development of the U.S. business after 1945

It was not until well after World War II, when the German electrical equipment company had recovered stability in its home market, that Siemens turned its attention back to the USA. A resumption of relations with Westinghouse and the 1954 opening of a new information office in New York marked the relaunch of the company’s business in the U.S. At first, Siemens concentrated on exporting medical technology in such forms as x-ray systems and dental equipment.

 

Over the course of the 1960s, it expanded its product portfolio with such items as electron microscopes, electronic components, test and measurement equipment, teleprinters and telecommunications equipment, as well as steam turbines and generators. Subsidiaries like Deutsche Grammophon and OSRAM also established a presence in the American market. But even though a considerable range of products were being exported to the U.S. by the early 1970s, the volume of operations was still limited in comparison to other markets outside Germany. 

Taking the initiative – A push to tap the market and get a foothold in the USA

Siemens AG, as the company became in 1966, did not decide to include the U.S. market more fully in its business strategy until the 1970s. Under its CEO Bernhard Plettner, it then decided to establish Siemens Corporation, headquartered in Iselin, New Jersey, as an expansion of what had previously been a purely informational and consulting activity in the USA. To strengthen its position in the U.S. electrical equipment market, the Siemens subsidiary entered into increasing numbers of joint ventures with other U.S. electrical corporations, and began acquiring American companies. This new era in business policy was inaugurated by the acquisition of Computest in 1973.  

 

In 1974 Paul Dax, the Managing Board member in charge of business outside Germany, summed up how important the U.S. market was for Siemens: “There is no way of bypassing the USA. Our [...] activities in the United States will be [...] a touchstone of our capacity to perform and adapt.” Vindicating his assessment, the company’s revenues from the U.S. began a steady rise in the late 1970s. Yet in spite of the high revenues, profits remained slim because of steep startup costs and various structural, institutional and staffing obstacles. 

In the black at last – Years of effort in the USA pay off 

Siemens Corporation did not get into the black until the mid-1980s – by which point the USA was growing into Siemens AG’s most important foreign market. One highlight of that development was the decision to list Siemens on the New York Stock Exchange in 2001. With revenues of USD 18.9 billion, North American operations that same year outperformed the German business for the first time. Unfortunately, as other German companies who took the same step had likewise found, the listing did not yield the anticipated additional surge in American business, and the company was delisted again in 2014. 

 

Nevertheless, the USA remains Siemens’ biggest single market in the world. As early as 2006, the U.S. business accounted for some 20 percent of total Siemens revenues. And just to take two examples, the USA was generating about 45 percent of the company’s global sales volume in medical technology and about 32 percent in building technology.

A pioneer in digitalization – The USA is now Siemens’ biggest market 

A highly skilled manufacturing workforce is critical to Siemens in the United States, where we've been active for over 160 years. The U.S. is now our largest market – we've invested about $35 billion here in the past 15 years.
Joe Kaeser, 2017

Since the turn of the millennium, Siemens’ operations in the American market have especially emphasized sustainability and digitalization. In 2010, for example, a client in the USA placed the company’s biggest onshore wind farm order to date. Two years later, a fleet of 258 wind turbines, with a total capacity of 593 megawatts, went into operation in the state of Iowa – capable of generating enough clean electricity to power 190,000 American households. In 2014, Siemens got the biggest order ever placed in the USA for local public transportation, when the San Francisco municipal transportation authority ordered 175 light rail vehicles, worth about USD 650 million. The cars stand out for their especially lightweight construction and efficiency, enabling them to consume up to 40 percent less energy than conventional vehicles.

 

As early as 2013, Siemens had equipped New York’s Metro system, more than a century old, with the Trainguard automatic train control system, thus making the transportation agency a pioneer in digitalization. Siemens has particularly emphasized advancing the digital transformation in the USA. It has invested more than 10 billion dollars in local software companies since 2007, a billion dollars a year in research and development since 2002, and more than 50 million dollars a year in vocational training programs since 2011. Looking back today on Siemens’ beginnings in this country, the company founder’s judgment has proved more than accurate. In its history of more than 150 years in the USA, Siemens has evolved from a rather unknown niche player into a powerhouse that is helping to shape the entire market.

Dr. Ulrich Kreutzer | Dr. Ewald Blocher

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Further information on this topic

Further reading

Ulrich Kreutzer: Von den Anfängen zum Milliardengeschäft. Die Unternehmensentwicklung von Siemens in den USA zwischen 1845 und 2001, Stuttgart 2013 (German only)