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Digitalisation is key to Siemens’ latest reorganisation

07 May, 2014

In the latest of a series of reorganisations, Siemens is creating a flatter management structure by eliminating its Sector level (including the current Industry sector) and slimming down from 16 to nine divisions. The changes take effect from October 1, 2014.

The changes were announced by Siemens’ president and CEO Joe Kaesar.

In future, Siemens plans to focus on three areas – automation, digitalisation and electrification ­– which it sees as having the greatest long-term potential. An extensive analysis started in August 2013 identified these as fields where Siemens will be able to achieve long-term growth and high profitability. In automation and electrification, Siemens says that it already holds a clear No. 1 position in many markets.

Bundling the Divisions and eliminating the sectors is expected to cut bureaucracy and costs, and accelerate decision-making. Support functions such as human resources and communications will be streamlined and managed centrally in future. These measures are expected to increase productivity by some €1bn a year by the end of fiscal 2016.

Another key element of Kaesar’s reorganisation is to involve employees more closely in the financial performance of the company. He wants to increase the number of employee shareholders by at least 50% to more than 200,000.

“By expanding share-based employee participation in our company’s success, we’re creating a sustainable ownership culture at Siemens,” Kaeser says. Siemens will make up to €400m available annually for staff incentives, depending on company performance.

A new Process Industries and Drives Division, with revenues worth around €11bn, will supply integrated drive technologies and systems. Siemens plans to focus on “booming core industries” such as oil and gas, food and beverages, chemicals and pharmaceuticals. The division’s CEO will be Peter Herweck, who is currently responsible for process industries. Siemens is hoping that it will generate profit margins of 8–12%.

Siemens believes that the process industry offers attractive opportunities that it can leverage more intensively with its automation and drives portfolio. The market for producing unconventional oil and gas also offers attractive growth potential.

Siemens CEO Joe Kaesar: creating a sustainable ownership culture

A new Digital Factory Division is intended to shape the future of manufacturing by merging the real and digital worlds in the areas of design, production and service. The division, with revenues worth around €9bn, will bundle automation systems, industrial switchgear and industry software (PLM). It will be headed by Anton Huber, who is currently CEO of the Industry Automation Division. The profit margin target for this division is 14–20%.

A Building Technologies Division will offer integrated automation systems and intelligent technologies for buildings, and continue to be headed by Johannes Milde. Revenues for this division were worth around €6bn in 2013, and the target profit margin in 8–11%.

A Mobility Division will use Siemens’ train technology and rail automation activities to target the growing “smart mobility” market with intelligent and integrated solutions. Revenues were worth around €7bn in 2013. Division CEO will be Jochen Eickholt, who currently heads the Rail Systems Division.

At the board level, Klaus Helmrich will be responsible for the Digital Factory Division, the Process Industries and Drives Division, the European and African regions. Siegfried Russwurm, currently CEO of the Industry sector, will become Siemens’ new Chief Technology Officer and Labour Director.

In the year to September 30, 2013, Siemens’ revenue from continuing operations totalled €75.9 billion. At the end of September 2013, it had around 362,000 employees worldwide.

•  In the second quarter of Siemens’ current financial year, the Industry sector achieved a profit of €456m – nearly a third higher than the previous year. On a comparable basis, second-quarter revenue rose 5% and orders increased 12% year-on-year. 

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