Siemens Slashes Workforce - Forbes.com

LONDON -

Siemens's Tuesday announcement of 16,750 sales and administrative job cuts worldwide, including 5,250 in Germany, was meant to ease investors with a clear restructuring plan. Instead the firm, struggling to improve its profitability and efficiency, saw its share drops and it now faces a looming strike as the job cuts represent 4.1% of the firm's global workforce.

Siemens (nyse: SIE - news - people ) Chief Executive Peter Loscher said, “the speed at which business is changing worldwide has increased considerably, and we’re orienting Siemens accordingly. Against the backdrop of a slowing economy, we have to become more efficient."

Shares in Siemens closed down 1.6%, or 1.14 euros ($1.78), to 69.97 euros ($109.46), in trading in Frankfurt, after having risen as high as 3.4%, on Monday, ahead of the news.

"The plan is not clear," Jochen Klusmann, an analyst with BHF Bank in Frankfurt, told Forbes.com. "This seems to me as a premature statement as a result of public pressure. We don't know how much this restructuring plan will cost and job cuts doesn't necessarily mean getting rid of people."

In fact, Siemens, which employs approximately 136,000 workers in Germany, is now facing a strike threat from German unions. But Werner Neugebauer, an industrial workers leader, said after a crucial meeting to decide their response to Siemens announcement that the job cuts were "unacceptable" and "completely exaggerated."

"If needed, we will pursue various forms of protest and resistance," Neugebauer said. But a spokesman for Siemens told Forbes.com that the firm is open to take part in negotiations "in the near future." "We are exploring all possibilities: early retirements, natural leaves or promotions inside the company."

Bolstered by earlier restructuring moves, the company's shares had advanced from about 60 euros ($70.21 at the time), in late 2005, to around 110 euros ($150.50), late last year, before retreating this year. A profit warning in March accelerated the decline. (See "Siemens's Nasty Surprise")

Siemens, which employs 400,000 people around the world, has said it aims to cut administrative costs by 1.2 billion euros ($1.9 billion), within two years.

The management at Siemens has been trying for the last few years to figure out how to make its lumbering engineering giant more efficient, and less bloated. Last October there was muted applause for Chief Executive Peter Loescher's plan to divide the company into three divisions. (See "Cosmetic Changes At Siemens.") At that time, there was no talk of job cuts or spin-offs.

More concrete in February was the company's announcement that it was divesting its enterprise communications division.

The job cuts announcement comes as new statistics on Monday showed shockingly low manufacturing output in Germany.

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