Osram to cut 4,700 jobs after spin-off from Siemens

FRANKFURT Fri Nov 30, 2012 6:22am EST

A traditional light bulb (100 watt) of lamp manufacturer Osram is pictured in Germering near Munich November 28, 2012. REUTERS/Michaela Rehle

A traditional light bulb (100 watt) of lamp manufacturer Osram is pictured in Germering near Munich November 28, 2012.

Credit: Reuters/Michaela Rehle

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FRANKFURT (Reuters) - German lightbulb maker Osram will cut another 4,700 jobs, or 12 percent of its workforce, and sell factories to compete with Asian rivals after being spun off from parent company Siemens.

Osram, which has annual sales of about 5 billion euros ($6.5 billion), said on Friday it wanted to save 1 billion over three years, with half the savings coming from procurement.

The firm, set to be spun off in the spring, has been slow to shift to light-emitting diodes (LED) from traditional incandescent bulbs, while Asian rivals built up capacity and drove down prices.

"We are entering the digital lighting age," Osram chief executive Wolfgang Dehen said, adding new jobs created in the LED field would not be enough to offset the decline in positions in its traditional business.

Siemens itself is spinning off Osram, whose brand is 106 years old, as part of an overhaul of its business which includes a 6 billion euro savings plan that will see it divest less profitable businesses and focus on areas of core expertise.

To that end, Siemens said this week it was to pay 1.7 billion pounds ($2.8 billion) for the rail business of British group Invensys to get better access to customers in Australia, Britain, Spain, and the United States.

Siemens plans to give 80.5 percent of Osram to its shareholders, keeping 17 percent of the business.

Osram aims to boost profitability by bringing new products to market more quickly. It could also buy chips for mass-market LED bulbs from rivals who can produce them more cheaply, while focusing its investment on high-end technology.

LEDs, best known for their use in flat-screen televisions and tablet PCs, are becoming increasingly popular as a source of general lighting in shops or restaurants, for outdoor displays, and for headlights in cars.

Consultancy McKinsey saw the LED market growing more than sevenfold to almost 65 billion euros by 2020, accounting for the bulk of global demand for lighting.

ASIAN GROWTH

So far, only two of Osram's 44 factories in 16 countries make LEDs - in Regensburg, Germany and Penang, Malaysia - but it is building a new plant in China at a cost of over 100 million euros to boost its presence in the fast-growing Asian market.

Meanwhile, newer players in lighting such as South Korean groups LG Electronics and Samsung Electronics are grabbing market share from traditional industry leaders - General Electric, Philips and Osram.

"In the short term, this year and early next year, the market environment (for LEDs) continues to be challenging," said Jamie Fox, manager of the Lighting and LEDs area at IMS Research, recently acquired by IHS.

The LED market had a volume of about $10.3 billion in 2011, which IMS Research expected would grow to $13.5 billion in 2015.

Of the cuts announced on Friday, which are to take place by 2014, 4,300 will be outside Osram's home market. Half of that figure will go via factory sales, Osram said. The 400 jobs to go in Germany will be from Berlin, Munich and Wipperfuerth.

The move will bring its total headcount reduction since the end of its fiscal year 2011, when it had a workforce of 41,000, to as much as 8,000.

Osram said costs for the new restructuring program will be in the mid-hundreds of millions of euros. Last week, sources told Reuters it would cost 500 million euros.

Sources have also told Reuters that Osram will publish the prospectus for its listing on December 7, ahead of a vote at Siemens annual general meeting on January 23.

(Editing by Victoria Bryan and Dan Lalor)

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