FRANKFURT — Siemens, the German industrial giant, said on Thursday that it would cut 4,500 jobs as it reacts to a slump in oil prices that has eroded its sales of equipment to the energy industry.þþLower oil prices have generally been a boon to the eurozone economy, freeing up cash that consumers can spend on other things. But in the case of Siemens, the effect is the opposite because of its large business supplying producers of oil, gas and electricity.þþSiemens said it needed to cut jobs and reduce costs because of “the persistently difficult environment in the global power generation market,” which the company said included “regulatory changes, massive price erosion, aggressive competitors and regional overcapacities.”þþThe job cuts bring the total number of layoffs this year to almost 12,000 out of a global work force of about 340,000, or a reduction of about 3.5 percent. Roughly half of the latest round of cuts will be in Germany, where about one-third of all Siemens employees are based.þþObjections from labor representatives, who by law have half the seats on the supervisory board, prompted the company to cut about 400 fewer jobs over all in Germany than had previously been planned.þþSiemens, based in Munich, also said that net profit in the first three months of the year more than doubled, to 3.9 billion euros, or about $4.4 billion. But the increase came from selling assets, including a maker of hearing aids and a stake in a household appliance manufacturer.þþProfit from Siemens’s industrial businesses, not including one-time gains from asset sales, fell 5 percent to €1.7 billion.þþSales from January to March, Siemens’s fiscal second quarter, rose 8 percent to €18 billion. But all of the gain was because of the weaker euro, which increased the value of revenue collected in dollars when converted into euros. New orders, an indicator of future sales, rose 16 percent to €20.8 billion, but more than half the increase was because of the favorable exchange rate, Siemens said.þþJoe Kaeser, the chief executive of Siemens, is in the midst of a reorganization intended to focus the company on its most profitable businesses. Siemens makes wind turbines, trains and streetcars, and X-ray scanners, among other products. Energy-related businesses, including equipment like gas turbines used to generate electricity, account for about a third of the company’s sales.þþTurmoil in the energy industry has raised questions about the wisdom of Siemens’s planned acquisition of Dresser-Rand, a supplier of equipment to the oil and gas industries, based in Houston. The $7.6 billion deal, which the companies have said they want to complete by summer, is under review by European Union antitrust officials.þþOil prices have regained ground since hitting lows in February, but the increase may not be big enough to restore the company’s profits. In addition, Siemens is focused on large customers such as power utilities at a time when power generation is becoming more decentralized because of the spread of solar and wind power.þþSiemens has struggled to grab a share of the wind power industry. Its wind power and renewables unit reported a quarterly loss of €44 million on sales of €1.4 billion.þþThe job cuts at Siemens are unlikely to have a broad economic effect in Germany, which has an unemployment rate of 4.7 percent, the lowest in the eurozone. But the company’s decision to concentrate the most recent cuts in Germany could be a sign that the country is becoming a less attractive place for companies to invest.þþGermany’s low unemployment rate has emboldened unions to seek higher wages after years of increases that barely kept pace with inflation. While bigger pay increases may be justified, they can encourage companies to invest in places where unions have less power.þþIn addition, slow growth in the eurozone has prompted Siemens and many other companies to look to the United States and Asia for growth while scaling back operations closer to their headquarters.þ
Source: NY Times
