- Reconciliation of interests signed for Power and Gas Division and
Process Industries and Drives Division in Germany
- Power and Gas to achieve cost savings of about €500 million worldwide,
of which €270 million are to be saved in Germany
- Capacity and structure adjustments can now begin in Germany
Siemens and the company’s Central Works Council have signed a reconciliation of interests based on the framework agreement reached in May. The goal is to increase the competitiveness of the Power and Gas Division (PG) and the Process Industries and Drives Division (PD). At PG alone, costs are to be reduced – as originally planned – by about €500 million worldwide, with €270 million of this amount to be saved in Germany.
Around 2,900 jobs will be cut in Germany instead of the roughly 3,400 announced last November. This reduction in job cuts is due, above all, to the continuation of the location in Görlitz, Germany, and the retention of activities at the Dynamowerk, a Siemens production facility in Berlin.
However, the measures are not restricted to capacity adjustments alone. Instead, they are primarily designed to achieve structural improvements and systematically sharpen the company’s focus on the technologies of the future.
- Framework agreement for restructuring at Power and Gas (PG) and Process Industries and Drives (PD)
- Cost reduction targets retained, job cuts unavoidable
- At the same time, a future pact for shaping the structural transformation
- Siemens establishes future fund for further qualification of employees
Following intensive exploratory talks, Siemens has reached an agreement with its Central Works Council and the IG Metall labor union regarding a future pact for the digital transformation. The pact defines the framework for the restructuring measures currently required at the Power and Gas Division (PG) and the Process Industries and Drives Division (PD) and is thus the basis for the negotiations that are now beginning regarding a reconciliation of interests and a social plan.
Talks were held yesterday in Munich between Michael Kretschmer, Prime Minister of the German state of Saxony, and Joe Kaeser, President and CEO of Siemens AG. The two leaders had a good, constructive dialogue in which both sides expressed their understanding of the business and political framework conditions. The conversation took place in an open and trust-based atmosphere.
There was agreement on the point that the structural transformation in the energy sector and the digital transformation of industry present major challenges – not only for companies but also for all people and institutions in Germany. Nevertheless, Joe Kaeser and Michael Kretschmer expressed their conviction that the benefits outweigh the downside when the opportunities associated with this structural change are used decisively. However, the prerequisite for successful implementation is a joint dialogue about the future between political leaders – such as the German federal government and states and the EU – and the business, scientific and labor communities as well as civil society. Siemens has agreed to play an active role and to make a contribution – also as part of its social responsibility.
Regarding the Görlitz location, Joe Kaeser repeated his willingness to examine – together with representatives of the German federal government and the government of the German state of Saxony – all options in order to provide prospects for the people and the entire region. This also includes the possibility of establishing a future fund that could be used to help shape the digital transformation.
Joe Kaeser reiterated his invitation to the employee representatives to work together in seeking solutions for the affected employees. Kaeser and Kretschmer emphasized that solutions-oriented negotiations must now begin immediately. It was agreed to continue the dialogue with the state government of Saxony within the framework of the joint efforts.
“In difficult times, it’s important to us that we talk with each other and not about one another. And that’s exactly what we did today. We spoke with the German Federal Minister for the Economy and to the Ministers of the Economy of the German states that are affected and explained again to them the difficulties that we have to deal with at the affected locations. We’re not just talking about a cyclical slump for which we merely have to bridge a short-term gap. We’re talking about a long-term change that we have to face.
We’re aware that these are painful cuts. They raise concerns and cause uncertainty. We understand these feelings. Nevertheless, it’s our responsibility to take action – in particular in order to secure the future of the businesses that are affected. The challenge now is to work together with all involved to find the best possible solution for all of the affected employees and locations. Our talks today were very constructive. We want to continue to engage in this open dialog.”
From our perspective, this statement is unclear, because it is not possible to determine how much of the figure refers to contracts that have been won and how much of it is attributed, for example, to investment subsidies granted over a period of 20 years. On this point, we can offer the following observations:
- Over the past five years alone, Siemens has paid the German government more than €20 billion in taxes, duties and social security contributions.
- If capital gains taxes paid on the dividend are included, this adds another €3.5 billion to the total.
- During the same period, Siemens received orders of nearly €60 billion from customers in Germany.
- Orders from the public sector involve a public tender process, and companies must win this tender to receive the order.
- In fiscal 2017, Siemens hired more than 38,000 employees worldwide, 5,200 of which were in Germany.
- We assume that we will also be able to hire people on a similar scale over the next few years.
Although this may look like a contradiction, it isn’t. The energy industry is struggling to cope with fundamental changes worldwide. Both the market for conventional power generation and the oil-and-gas market are contracting rapidly.
The trend is toward smaller, distributed units and away from centralized power generation at large power plants. This change has led to massive overcapacities on the market. Currently, the estimated production capacity for gas turbines that have a power output higher than 100 MW is at about 400 units. Recently, however, there was only demand for about 110 gas turbines. The situation with steam turbines and generators is similar.
We must come to terms with the fact that this is not just a short-cycle weakening of demand but rather a structural – and thus long-term – change in this industry. In our home market of Germany, in particular, we’re currently hardly seeing any demand at all.
In light of these developments, we accept responsibility precisely because we face up to difficult situations and are not afraid to make the necessary changes. If a business’s market contracts for the long term, we have to act in the interests of the entire company and its employees. Only profitable areas of business secure jobs sustainably. It’s due precisely to this approach that Siemens is in good shape today.
Over the next several years, the number of positions in the affected areas at Power and Gas and at Process Industries and Drives is to be reduced by a total of around 6,900 jobs. Half of these jobs are in Germany. The other affected locations are to be found in the US, in other European countries and in the rest of the world.
We’ll now begin consultations with the employee representatives on the planned measures in a timely manner. In the process, we’ll be taking a close look to see if perhaps new employment opportunities arise in other parts of the company, although this won’t be possible in all cases. We’re not participating in current speculations regarding the form and timing of the implementation of the announced steps. Our goal is to reach a viable agreement with the employee representatives during the course of this fiscal year.
No. Siemens has been investing for many years now in technologies that have been instrumental in enabling the use of renewable energies. With our majority holding in Siemens Gamesa Renewable Energy, we’re the global market leader in renewables in terms of the installed base of power-generation stations. At the same time, we’re constantly investing in technologies that enhance the performance and efficiency of using conventional power-plant technology
- Structural changes in markets for Power and Gas Division and Process Industries and Drives Division make consolidation of global setup necessary
- Reduction of about 6,900 jobs worldwide, half of them in Germany
- Increased investments in future growth markets offer opportunities
Siemens is responding to the rapidly accelerating structural changes in the fossil power generation market and the commodity sector. A consolidation plan for the Power and Gas Division (PG), the Power Generation Services Division (PS) and the Process Industries and Drives Division (PD) aims to increase capacity utilization at production facilities, drive efficiency and enhance expertise by bundling resources.
Dear Mr. Schulz,
Through the media, you have raised accusations against our company by claiming that, among other things, SIEMENS “profited both directly and indirectly from the German state for decades, [and] now the employees have to bleed for management mistakes.” You have berated our company as “profiteers who exploit the state” and our executives as “Manchester capitalists” and “irresponsible managers.”
I would like to address these accusations and – especially in times of political uncertainty – contribute some important facts to the discussion.
Over the past five years alone, our company has paid the German state over €20 billion in taxes, duties and social-security contributions. If capital gains taxes paid on the dividend are counted in, another €3.5 billion can be added to this figure. It is indeed true that the previous coalition government successfully and prudently supported Germany’s entire export-leading economy, including SIEMENS. The prosperity that we enjoy in our home country is at a historic high. Well-managed companies are setting one record after another, and Germany enjoys a better global reputation than ever. This, by the way, also holds true for Siemens, which was recently selected as the world’s top regarded company by 15,000 opinion leaders from 65 countries.
I hope these facts inspire you to reconsider the definition of “profiteers who exploit the state."
I would also be interested in hearing from you what specific “management errors” you see in connection with the power generation business at Siemens.
Our country’s energy transition was the right move, but the method and timing chosen for its implementation were extremely unfortunate. By taking this route, the coalition government burdened the nation’s taxpayers with costs of over €400 billion. In addition, the large majority of the jobs created by generous subsidies, primarily in the solar industry, were in China. The refusal to provide risk coverage for nuclear-powered and coal-fired steam turbines creates a competitive disadvantage that our main competitors do not have to deal with – thanks to their governments. We, on the other hand, do have to struggle with this challenge – especially in our efforts toward ensuring proper utilization of our factories and securing jobs.
Returning to the matter at hand, I would like to call your attention to the following facts:
SIEMENS employs around 115,000 people in Germany, where it is also providing vocational training to nearly 7,000 apprentices. Of these people, our power-generation business currently employs about 16,000 colleagues, mostly in work for export markets. In Germany, there is hardly any demand at all any more for power plants fired by gas or coal.
Of these 16,000 jobs, about 2,900 will be lost over the next two to five years due to the structural transformation as the energy sector transitions to renewable energies – a segment in which SIEMENS is the global market leader in terms of installed base. The fact that our competitors are experiencing far greater difficulties offers little comfort in this situation. However, it does make it clear that these are not problems of our own making. Consequently, it is wrong to accuse us of having relied exclusively on conventional power generation. With Siemens Gamesa Renewable Energy, we have the leading supplier in the renewable energy industry.
Now to the opportunities: In fiscal 2017, SIEMENS hired more than 38,000 employees worldwide, of whom about 5,200 were in Germany. We assume that we will also be able to hire at a similar scale in the coming years.
This would mean that, during the same period in which the 2,900 jobs were lost, we would be hiring some 16,000 employees in Germany. This hiring provides a robust foundation upon which we hope to be able to offer perspectives for as many of the people who are affected as possible – supported by training measures, for which we spend more than €500 million each year, by the way.
As far as the path to the future is concerned, I can assure you that – with great care and respect – we are working to resolve the issues of structural transformation in the field of fossil power generation. The integration of our employees into these processes as part of co-determination within the company is something we value highly. We also prefer to speak with each other rather than about each other, and we seek solutions based on facts. To enable this, however, the dialogue between representatives of the employees and of the company must begin immediately. Turning the public discussion on this point into a contest in which people try to outdo each other with populism and rallying cries while refusing to engage in a dialogue does not help the people who are truly affected. If it helps anyone at all, it helps our competitors.
You accuse us of “irresponsible management.” We will have to live with that charge. But perhaps you could consider this question: Who is it that is truly irresponsible in their actions? Those who proactively address foreseeable structural problems and look for long-term solutions or those who refuse to take responsibility and do not participate in a dialogue? This is one of the key questions of our day at a time when not only the interests of individual parts of the company at Siemens are at stake but the interests of an entire country. This question is, of course, one of the burning issues when it comes to the political leadership of our country.
Digitalization will change the economy by triggering an unprecedented structural transformation. Employee representatives – and political leaders – will need to learn how to deal with this change. In this context, we speak of the “Social Market Economy 2.0” concept. Slogans like “Manchester capitalism” might win popular applause. But it will be others who laugh quietly and laugh last. It will be those who decisively shape the challenges and opportunities of the future – above all China and India.
At the beginning of this millennium, Siemens was forced to give up its roots, its telecommunication business, in an inglorious manner. This happened because the company had refused to face reality. In the end, the demise of the telecommunications business at Siemens nearly toppled the entire company.
We cannot allow that to happen to us again. We owe resolute commitment on this point to the 98% of our colleagues who are not directly impacted by the structural transformation. After all, we have more to lose than just an election.
I hope this letter has helped you gain a more objective view of the situation, and I invite you to begin a constructive dialogue. I would be pleased to personally engage in this dialogue with you at any time.
President and Chief Executive Officer Siemens AG
Siemens AG (Berlin and Munich) is a global technology powerhouse that has stood for engineering excellence, innovation, quality, reliability and internationality for 170 years. The company is active around the globe, focusing on the areas of electrification, automation and digitalization. One of the world's largest producers of energy-efficient, resource-saving technologies, Siemens is a leading supplier of efficient power generation and power transmission solutions and a pioneer in infrastructure solutions as well as automation, drive and software solutions for industry. The company is also a leading provider of medical imaging equipment – such as computed tomography and magnetic resonance imaging systems – and a leader in laboratory diagnostics as well as clinical IT. In fiscal 2017, which ended on September 30, 2017, Siemens generated revenue of €83.0 billion and net income of €6.2 billion. At the end of September 2017, the company had around 372,000 employees worldwide. Further information is available on the Internet at www.siemens.com.
Status of the information: 2017-Dec-21