Merck's Loescher to be Siemens' first outsider CEO

FRANKFURT (Reuters) - German industrial conglomerate Siemens broke with tradition on Sunday by appointing a new chief executive from outside the company for the first time in its 160-year history who is also a non-German.

Siemens hopes Austrian-born Peter Loescher, a top U.S. healthcare executive who is relatively unknown in Germany, will restore the tarnished reputation of Siemens, which is battling multiple investigations into suspected bribery and corruption.

Current CEO Klaus Kleinfeld tendered his resignation last month after failing to receive clear backing from the supervisory board, which feared Kleinfeld could yet become implicated in the course of the investigations.

The choice of Loescher -- who, like Kleinfeld, is 49 years old -- is intended to ensure that the future head of Siemens will remain untainted regardless of the outcome of probes by German and U.S. authorities.

The appointment will also begin to fill a power vacuum left by Kleinfeld and former chairman Heinrich von Pierer, who stepped down just days before Kleinfeld did.

Wolfgang Reitzle, CEO of industrial gases group Linde, had been widely reported to be favorite for the job but repeatedly stated his commitment to Linde.

"I am convinced that Mr. Loescher has what it takes to steer Siemens through its current difficulties and into a better future," said Siemens' new chairman Gerhard Cromme, who has initiated a sweeping clean-up during his month in the job.

Loescher, who currently heads U.S. drugmaker Merck's global pharmaceuticals business, will take up his job at Siemens on July 1.

He manages a staff of 35,000 at Merck, less than one-tenth of Siemens' 485,000-strong workforce.

An MBA graduate of Vienna University School of Economics, Loescher has also studied in Hong Kong and at Harvard.

He is fluent in English, Spanish and French and can get by in Japanese thanks to a stint as CEO of the Japanese division of drugmaker Aventis, now Sanofi-Aventis.

POWER BASE NEEDED

Loescher, an avid skier, is no stranger to challenges and is said to be adept at improving the efficiency of operations.

During his time at Merck, company sales growth has revived thanks to popular new medicines and vaccines -- including the first vaccine against cervical cancer and a pair of potent cholesterol drugs -- boosting Merck shares by 56 percent.

But these drugs were in development long before Loescher arrived, and Morningstar analyst Heather Brilliant it was too soon to assess Loescher's contribution.

"For the time he has been there I would say he has had a medium-level profile," she said.

Brilliant speculated that one consideration for Loescher may have been that Richard Clark, who became Merck's CEO two years ago, is likely to remain at the helm for the foreseeable future.

Loescher's appointment at Merck last April was described at the time as a bombshell for Merck's management because he was an outsider and was widely seen as a possible heir to Clark -- a setback for other ambitious executives at the firm.

As Loescher finds his feet at Siemens, he may be able to draw on experience from his time at the world's largest conglomerate and Siemens rival, General Electric, where he headed the healthcare biosciences division.

In a 2005 interview, Loescher - who originally wanted to become a diplomat -- said his recipe to get to the top was: "The job has to be fun."

Fun, however, may be sparse at Siemens.

Analysts have said Siemens is not an easy group to manage and a manager coming from the outside is expected to take two to three years to understand it.

The trains-to-lightbulbs conglomerate has 11 divisions -- including a healthcare division boosted by the $5.3 billion acquisition of Bayer's diagnostics unit a year ago -- and almost half a million staff.

In 2006, Siemens reported sales of 87 billion euros ($118 billion), compared with Merck's $23 billion.

"The company has been very self-contained. Loescher will need to build a power base for himself and then ensure his acceptance," Juergen Kurz of German shareholder rights group DSW said in an interview with German Daily Der Tagesspiegel.

Loescher could start to build such a base with German metal union IG Metall, which represents Siemens employees and issued a statement of support on Sunday.,

"We have spoken to Mr. Loescher extensively yesterday and today. We have gained the impression that Mr. Loescher can solve the leadership crisis at Siemens on account of his personality and steer the company into calmer waters," it said.

(Additional reporting by Ransdell Pierson in New York)