Siemens names CFO to lead turnaround after dumping CEO
FRANKFURT (Reuters) - German engineering giant Siemens (SIEGn.DE) named finance chief Joe Kaeser, a 33-year company veteran, as its new boss after dumping Chief Executive Peter Loescher four years before the end of his contract following a series of profit warnings.
Kaeser, 56, faces the challenge of whipping into shape a lumbering conglomerate with 78 billion euros ($104 billion) of annual sales and products ranging from gas turbines to high-speed trains and ultrasound machines.
Years of breakneck expansion and forays into new businesses, including an ill-fated detour into solar energy which led to a billion-euro loss, have left Siemens in disarray and lagging rivals such as General Electric (GE.N) in terms of profitability.
Just as a downturn in the global economy hurts demand for its bread-and-butter industrial products, the Munich-based group has been hit by big charges due to delays in offshore wind power and high-speed train projects.
Kaeser must now formulate a long-term strategy for Siemens, shed non-core units like those making hearing aids or healthcare software, and return control of the firm's far-flung businesses to top management.
He has earned a reputation as a hands-on pragmatist during more than three decades at Siemens, seven of them as CFO, and analysts say he has an understanding of its business and culture that was lacking in Loescher, an Austrian who was the first external recruit ever to run the company.
Loescher was ousted in a boardroom battle after the company issued its second profit warning of the year last week.
"His most urgent task will be to convince Siemens' workers, even more than in the past, that radical and sustainably profitable restructuring is necessary," said Christoph Niesel, a fund manager at Union Investment, which holds about 1 percent of Siemens shares.
BACK TO THE ROOTS
Kaeser gave a first glimpse of his plans at a news conference on Wednesday, indicating a return to the roots of the 166-year-old company and dismissing Loescher's overly ambitious profit margin target.
"Whether we have 12 percent or only 10 percent in the end is not the only relevant aspect," Kaeser, dressed in a dark suit and blue tie, told journalists at Siemens headquarters.
"What is really important is that we close the profitability gap with competitors and that all measures are structurally goal-oriented beyond 2014," he said.
Siemens shares were up 1.1 percent at 81.58 euros by 1440 GMT, while Germany's DAX index .GDAXI was up 0.1 percent.
Loescher had promised that Siemens, the second biggest German company by market value after Volkswagen (VOWG.DE), would grow faster than rivals such as GE, ABB (ABBN.VX) and Philips (PHG.AS). He set his sights on increasing annual sales by about a third to 100 billion euros.
By comparison, GE has focused on boosting profits since the 2008/9 recession by slashing costs and expanding into growth areas such as energy.
"During the five years since the recession, the transformation of (GE's industrial portfolio) has been significant and positive," said Jack DeGan, chief investment officer at Harbor Advisory Corp, which owns GE shares.
Investors have taken notice. Over the past two years, GE shares have risen nearly 40 percent, while those of Siemens have stagnated.
Last year, Loescher applied the brakes to his aggressive expansion, announcing plans to save 6 billion euros over two years to boost the company's core operating profit margin to at least 12 percent by 2014.
Last week, Siemens abruptly abandoned that target, which turned the supervisory board against Loescher and led to his dismissal. Loescher will remain on hand to help handle some ongoing issues until September 30, Siemens said.
Kaeser, a Bavarian who speaks with a southern German lilt, vowed to put Siemens back on an "even keel" and create a high-performance team to refine the firm's savings program. He said he would lay out a more detailed outlook for the company and its 400,000 employees, a third of whom are in Germany, this autumn.
But some investors remain skeptical that the man who has been at Loescher's side for years and at the company since 1980 is the right person to get its problems under control, even with an autocratic management style that demands loyalty.
"Kaeser has been the behind-the-scenes CEO at Siemens anyway, so he too is responsible for all decisions that Siemens made," said a fund manager at a top holder of Siemens stock who requested anonymity.
"Nothing will change now. Siemens has had an execution problem, and I do not expect that to change."