* Siemens CEO earns praise for shrewd moves in Alstom battle
* Kaeser refocusing on profits after ill-fated growth push
* GE threat, restructuring remain challenges for Kaeser
(Adds GE comment)
By Jens Hack and Maria Sheahan
MUNICH/FRANKFURT, June 23 Within weeks of taking
the helm at Siemens in 2007, Peter Loescher splashed
out $7 billion for U.S. diagnostics firm Dade Behring. It was
the first of several acquisitions that went bad and ultimately
cost the Austrian his job.
Joe Kaeser replaced Loescher less than a year ago, promising
a more disciplined approach. And in his first major test as CEO
- the politically-charged battle for France's Alstom - he has
been true to his word.
On Friday, the French government announced it had chosen
U.S. conglomerate General Electric over Siemens and its
bidding partner Mitsubishi Heavy Industries in the
contest to acquire the energy assets of Alstom.
But rather than looking like the loser, Kaeser - who
celebrates his 57th birthday on Monday - emerged with his
reputation for prudence intact and his dealmaker image
Siemens may have missed out on Alstom, giving its biggest
global competitor GE a stronger foothold in its European
backyard. However the message to Siemens shareholders is clear:
the Loescher era is over and under his successor the company
will not do deals at any price.
"Kaeser is looking pretty good now," said Ingo-Martin
Schachel, an analyst at Commerzbank. "He was not just
disciplined but also clever in that he made it a little more
difficult for GE to buy the Alstom assets."
Hans-Joachim Heimbuerger, an analyst at Kepler Cheuvreux,
said: "Siemens has lost the battle for Alstom. Our grief is
In early May, top executives at the German company were not
so sure their Bavarian CEO would be able to say no to Alstom.
As Kaeser put the finishing touches to a big restructuring
of the 167-year-old company, some within it voiced concern that
Siemens would waste time and money integrating its weakened
French rival, according to officials at headquarters in Munich.
Unions grumbled, concerned Kaeser would end up giving job
guarantees to French Alstom workers that would ultimately hurt
German employees. Other staff wondered whether Siemens would
give away control of its train business to France - an
asset-swap that could bolster the German firm's energy
activities, but also saddle it with antitrust headaches given
the dominance of a combined firm in turbines, transmission and
Finally, on May 7, at a presentation to reporters and
analysts in the German capital, Kaeser unveiled "Vision 2020",
the restructuring plan he had been honing for nine months. It
was meant to signal a break from the go-for-growth Loescher era
and usher Siemens into a new age of profitability.
But the grand plan was overshadowed by questions about
Alstom. The previous week Siemens had announced it was mulling
an offer for the French firm to counter a potential deal with
Kaeser insisted he would not be forced into a deal. He was
determined, Siemens officials say, not to overpay for Alstom and
overstretch his management team.
Even without the addition of the French group's power
assets, Siemens' energy business needed close attention. Profit
had tumbled in the second quarter and longtime head Michael
Suess had been pushed out, replaced by Lisa Davis of Royal Dutch
Shell, who would oversee the energy activities from the
It was around this time that Kaeser hatched "Montblanc",
codename for the joint bid with Mitsubishi - a company Siemens
had got to know in recent months during talks on the sale of a
majority stake in the German firm's Austrian metals business.
"The negotiation teams already knew each other and could get
right back to negotiating," one person close to the matter said.
The beauty of bringing Mitsubishi in: Siemens could limit
its bid to the one Alstom asset it really wanted - gas turbines
- and avoid the antitrust hurdles it would have faced had it
bought the French group's full energy business as GE planned.
Siemens workers and shareholders breathed a sigh of relief.
Even if the deal came off, the risks to the German firm would be
When Siemens and Mitsubishi finally unveiled their joint
offer on June 16, Kaeser sold the highly complex deal as an
"alliance" that would keep Alstom largely intact - a key demand
of the French government.
Thrown on the defensive, GE was forced to retool its own
12.4 billion euro ($16.9 billion) bid to give the French greater
say. On Friday, GE was anointed the winner but received a list
of further French demands and news that the government would
purchase a 20 percent stake in Alstom.
In a letter to staff on Sunday, a copy of which was obtained
by Reuters, Kaeser said it was unfortunate that the
Siemens-Mitsubishi offer had not won the day, but also made
clear that there were benefits to having lost out.
"Implementing the (GE-Alstom) deal will keep two of our
competitors heavily occupied for years," he said in the letter.
"And with the French government as a major shareholder, it
will be difficult (for GE) to push through American-style
productivity and restructuring measures. This represents a huge
opportunity for us."
A GE spokeswoman dismissed Kaeser's comments as "good spin"
and noted that the U.S. company has successful joint ventures
with several firms in which governments hold stakes, including
France's Safran and Italy's Nuovo Pignone, an oil and
gas equipment maker.
"It's normal for us," the spokeswoman Deidre Latour said.
"This does not change the economics of the deal."
Some analysts believe Siemens has missed an opportunity in
The French group's gas turbine activities, with their large
installed base and service contracts, would have given Siemens
the high growth, high margin business Kaeser has coveted.
And now that GE has swooped on Alstom, Siemens can no longer
boast about being the only big global player to offer both grid
and power generation equipment.
"Alstom was a relatively weak competitor financially that
could hardly make its customers attractive offers," said
Christoph Niesel, a fund manager at Union Investment. "Now it
can use GE's balance sheet to make offers that are just as
attractive as those of Siemens."
On top of that problem, Kaeser may find the unions less
friendly after he tried to offload the firm's rail business to
Alstom as part of his offer. The Siemens veteran is well aware
that worker unrest contributed to Loescher's downfall.
More broadly, Kaeser still faces the challenge of closing a
profitability gap with rivals like GE and Switzerland's ABB
. To help achieve that goal, he has promised to deliver
1 billion euros in annual productivity gains through his
With his shrewd manoeuvring over Alstom, Kaeser has
reassured investors that he will not rush into deals like
Loescher did with Dade Behring, a company whose value Siemens
was forced to write down by 1.2 billion euros three years later.
But his biggest challenge - transforming Siemens and its
complex mix of businesses - remains.
"Mr. Kaeser has promised shareholders a lot and hopes are
high that things will improve," said Marcus Poppe, a fund
manager at DWS. "But until now we haven't seen an improvement in
(Additional reporting by Joern Poltz and Alexander Huebner;
Writing by Noah Barkin; Editing by Sophie Walker)