Siemens names CFO to lead turnaround after dumping CEO
FRANKFURT (Reuters) - German engineering group Siemens (SIEGn.DE) named finance chief Joe Kaeser as its new boss after dumping Chief Executive Peter Loescher four years before the end of his contract following a second profit warning this year.
Loescher had promised that Siemens, whose products range from gas turbines to fast trains and ultrasound machines, would grow faster than rivals such as ABB (ABBN.VX), General Electric (GE.N) and Philips (PHG.AS), but profitability was held back by bungled acquisitions, charges for project delays and a focus on sales growth.
Last week, Siemens abruptly abandoned its target of boosting its core operating profit margin to at least 12 percent from 9.5 percent by 2014, which turned out to be the final straw for supervisory board members, most of whom voted for his dismissal at a meeting on Wednesday.
Kaeser, 56, will start on Friday his new task of turning around Germany's second-biggest company by market value and a symbol of its industrial backbone.
He has earned a reputation as a hands-on pragmatist during his 33 years at Siemens, seven of them as CFO, and analysts say he has an understanding of its business and culture that they judged was lacking in Loescher, an Austrian who was the first external candidate ever to get the top job.
"Joe Kaeser is in our opinion the best choice in this situation," Christoph Niesel, a fund manager at Union Investment, which holds about 1 percent of Siemens shares.
"His most urgent task will be to convince Siemens' workers, even more than in the past, that radical and sustainably profitable restructuring is necessary," he added.
Loescher will remain on hand to help handle some ongoing issues until September 30.
Siemens shares were down 0.8 percent at 80.03 euros by 1101 GMT, while Germany's DAX index .GDAXI was down 0.4 percent.
BACK ON EVEN KEEL
Loescher had only last year announced a plan to save 6 billion euros over two years to boost its core operating profitability before dropping the 2014 margin target last week.
In its fiscal third quarter through June, its profit margin shrank to 6.5 percent from 9.2 percent a year earlier, weighed down by costs related to the savings program, charges related to wind power and rail projects.
"We've been too preoccupied with ourselves lately and have lost some of our profit momentum vis-a-vis our competitors," Kaeser said in a statement on Wednesday.
He vowed to put Siemens back on "even keel" and create a high-performance team that would be able to refine Siemens's savings program and address medium-term prospects this autumn.
"You'll see, there'll also be a Siemens after 2014," Kaeser said, a swipe at Loescher's now-failed "Siemens 2014" program.
Analysts have said they expect Kaeser to tighten project control, by selling off more non-core businesses, such as those that make rail technology or healthcare software, and to set more conservative and realistic targets.
Industrial companies like Siemens have been suffering from a slowdown in the global economy, and weak manufacturing data from China has fanned concern that a recovery will not materialize until next year. Loescher had been criticized for being too slow to react to the downturn.
Siemens's rivals have been making less heavy weather of that backdrop. GE recently unveiled a surprise jump in its backlog of orders for locomotives, X-ray machines and scores of other industrial products, and Dutch rival Philips also reported robust orders for ultrasound and scanning products.
(Reporting by Maria Sheahan; Editing by Jonathan Gould and Will Waterman)
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