SEPARATION ANXIETY

At Siemens, opposition grows to holding company

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Talk by Mr. Kaeser about turning Siemens into a holding is raising eyebrows on the supervisory board. Picture source: AP.

The extension Joe Kaeser’s contract as Siemens chief executive, which would take place as early as this summer, is considered almost a certainty.

The profits for the technology conglomerate are rising and its share price is close to a record high. According to sources close to the supervisory board, Mr. Kaeser can expect wide support. And yet, there is growing discomfort, especially among employee representatives.

Supervisory boards are responsible for hiring and firing chief executives and can also weigh in on corporate strategy.

A recent report by Handelsblatt, citing company insiders and investors, that Mr. Kaeser is intent on turning Siemens into a holding company has sparked concern among labor representatives. Works council chief Brigit Steinborn, in a message to confidants and other labor leaders, said Siemens should remain a single, integrated company.

“To further divide the group would jeopardize the Siemens brand and the company,” Ms. Steinborn, who  is also deputy chairperson of the Siemens supervisory board. Siemens needs long-term prospects and should not “yield to the whims of the capital markets,” she said.

It’s precisely because Siemens is an integrated technology group, Ms. Steinborn added, that it is also prepared for more difficult times. “Thus, the company model must remain that of a parent company,” she said.

“Siemens’ strategy is aimed at greater autonomy and therefore higher self-responsibility of the individual divisions.”

Marcus Poppe, Deutsche Asset Management

Jürgen Kerner, treasurer at the powerful IG Metall trade union and a member of the supervisory board, was also critical of the potential move.

“IG Metall rejects a holding structure,” Mr. Kerner said. Siemens benefits in particular from its broad positioning, he said, especially in terms of digitization and the internet.

But the opposition might be too little, too late. Mr. Kaeser has already announced plans for the flotation of Siemens’ medical technology unit Healthineers. And its wind power division has been listed on the stock market since its merger with Spanish company Gamesa.

Plans to divvy up the company apparently don’t end there. Mr. Kaeser, in an interview with “Euro am Sonntag,” spoke about the flotation of a “digital industrial company” under the Siemens umbrella. Siemens needs to transition from a heavy tanker to a “coordinated and efficient fleet organization,” he said.

Insiders emphasize that there’s no plan for a purely financial holding company. Siemens also wants to retain the majority of the shares in the medical technology division.

“Nevertheless, there is a creeping process towards a holding company,” said one insider. “That is hard to reverse.”

At the beginning of his term, Mr. Kaeser emphasized a “market-integrated approach” with the goal of creating synergies. Later, the chief executive said if this approach proves too complicated to implement, then “we can always still go in the direction of a holding company.”

The business news magazine Manager Magazin reported that representatives from the capital side were also against a holding model. Sources close to the supervisory board said the situation is being monitored.

The supervisory board, however, has supported all previous steps, so there’s little fundamental criticism of Mr. Kaeser’s course of action. The discussion on the long-term strategy is therefore unlikely to muddy the waters on the issue of prolonging his contract.

That’s because it’s clear that Mr. Kaeser’s leadership is bearing fruit. In contrast to its competitors, Siemens is moving forward under its own steam. The chief executive  was able to increase the profit forecast at the end of January.

“Kaeser is currently doing well there,” says one labor representative. Investors are also positive about the company’s current course. “Siemens’ strategy is aimed at greater autonomy, thereby placing greater responsibility in the hands of the individual divisions,” said Marcus Poppe from Deutsche Asset Management. This freedom generally leads to increased competitiveness, he said.

Formerly the company’s chief financial officer, Mr. Kaeser took over the top job in the summer of 2013, after the downfall of the ill-fated Peter Löscher. He’s let the supervisory board know that he is prepared to continue beyond 2018 to complete his “Vision 2020.”

Axel Höpner is based in Handelsblatt’s office in Munich, focusing on the state of Bavaria’s companies, including Allianz and Siemens. To contact the author:hoepner@handelsblatt.com

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