Reorganization 2.0

After Year on Job, Kaeser Uses Bavarian Wit, Folksy Charm, to Press Case for a Turnaround at Siemens

Siemens CEO Joe Kaeser leaves the Elysee Palace in Paris on June 26, 2014, after a meeting with the French president, Francois Hollande. Source DPA
The Siemens chief executive, Joe Kaeser, has restored confidence and a sense of direction in the struggling German electronics company after one year on the job. Here, Mr. Kaeser leaves a June 26, 2014, meeting at France's Elysee Palace.
  • Why it matters

    Why it matters

    Siemens is one of Germany’s largest private employers and a bellwether for German blue chip companies.

  • Facts

    Facts

    • Siemens-engineered products range from energy technology to transportation.
    • Its health-care division generates 12 percent of company sales.
    • The company employs 362,000 people in 190 countries.
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    Audio

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Even Joe Kaeser hasn’t performed miracles as chief executive officer at Siemens.

A year has passed since Peter Loescher was ousted from leadership of the German industrial giant after a series of setbacks and sagging market value. Mr. Kaeser, then chief financial officer, moved to the top after letting it be known that he could do the job better.

In Siemens’ 167-year history, 12 months is a brief moment. But in the short-lived, quarterly-driven stock-market world, it’s a long time. And the financial results that the new chief executive presented on Thursday looked decidedly better than those of his predecessor.

No growth and lagging profits are again the problems. Under Mr. Kaeser, Siemens still trails the profitability of its biggest competitors – above all, arch-rival General Electric.

 

No growth and lagging profits are again problems at Siemens. Under Mr. Kaeser, Siemens still trails the profitability of its biggest competitors – above all, arch-rival General Electric.

But lack of growth under Mr. Kaeser shouldn’t be the chief topic. So much had to be done: The new chief executive has restored the company’s self-confidence and shown a long-term path to a better future.

Whether Mr. Kaeser can actually establish a new era, is still open for debate. In his first 12 months, all has not run perfectly. In the fight against G.E. to acquire the French gas turbine company Alstom, he showed tactical skills that in the end could hardly conceal defeat. Nevertheless, he didn’t look like a fool.

First, a look back. Overall, Mr. Loescher did not have such a bad balance sheet in his years as chief executive. After the Siemens bribery scandal exploded last decade, only an outsider could have come in and thoroughly cleaned things up. Mr. Loescher, the newcomer who was appointed in 2007, stood credibly by his mantra: “only clean business from now.”

Siemens CEO Joe Kaeser June 2014 at France's Elysee Palace. Source AP
Siemens on Thursday reported better-than-expected quarterly profit and sales, signs that the reorganization set in motion by CEO Joe Kaeser is beginning to take hold. Source: AP

 

But as company leader, he often took a zigzag course. At times, Mr. Loescher pulled the emergency brake with massive downsizings, only to invest heavily again in growth. He announced a 100 billion profit goal without explaining how he wanted to achieve it. The idea of “green infrastructure giants” was not bad, but Mr. Loescher did not make it a reality. Siemens’ entrance and exit in solar industry businesses stands symbolically in his zigzag legacy.

Mr. Kaeser had observed all of this with growing skepticism from the co-driver’s seat. When he was promoted on July 31, 2013, he knew exactly what to do. The man had his own idea for Siemens and he quickly ensured that access to customers improved.

Mr. Kaeser had observed all of this with growing skepticism from the co-driver’s seat. When he was promoted on July 31, 2013, he knew exactly what to do. The man had his own idea for Siemens and he quickly ensured that access to customers improved.

After first rushing to put out fires, however, Mr. Kaeser took his time. Too much time. When he took over, he announced that his most important task would be to restructure the company. But he didn’t come up with concrete plans to do so until May 2014 and lost valuable time in the delay.

His starting position was ideal. Mr. Kaeser had a better chance than almost anyone to boldly change an often cumbersome company. He is beloved by employees, as well as by capital markets.

His greatest merit up to now is having laid out a long-term marching route. With his Vision 2020 strategy, Siemens cleverly took up the challenge from IG Metall, Germany’s industrial union of metalworkers.

Bringing together the company’s four sectors (industry, healthcare, energy and infrastructure) in order to reduce bureaucracy is a major goal of Vision 2020, but not the most important element.

In a few years, Mr. Kaeser or his successor will announce the next restructuring, one designed to endure and be like no other company’s. Mr. Kaeser’s plan also identifies areas for growth. He wants to better cover electrification and shape changing times in the digital world.

The ideas are good, but mistakes are easy to make. Siemens might be too late, for instance, in entering the booming U.S. oil and gas markets. The euphoria around shale gas could be past its peak, and now Siemens might not enter the adventure at any price.

Joe Kaeser has not started a revolution in the traditional businesses at Siemens, but he never wanted that. The former chief financial officer has, however, given the company a new perspective. Now, much hangs on his new deals, which should soon follow.

Axel Hoepner is Munich office manager for Handelsblatt. He can reached at hoepner@handelsblatt.com.

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