German parent’s job cut plans to hit Siemens India

MUMBAI: Siemens AG has decided to cut 15,000 jobs by the end of 2014 across the world to reduce costs and improve profits, triggering speculation about the possible downsizing of its India operations as well. The German engineering and capital goods conglomerate, which has been grappling with narrowing profit margins and muted sales, will reduce 5,000 jobs in Germany, and 10,000 posts across geographies. Siemens has 370,000 workers worldwide, of which 19,000, or 5%, are in India.


Siemens executives remained non-committal on the quantum of downsizing in India. “With regard to the job cuts in Siemens, we do not provide figures according to single locations, countries or facilities,” Michael Friedrich from the corporate communications and government affairs team of Siemens AG said in an email response to ET.

Siemens AG’s business catering to industrial and energy sector have been badly hurt due to the global economic slowdown. The company’s profit margin has been trailing its peers at around 9.5%, while ABB has a margin of over 10% and General Electric 15%.

“The outlook for the Indian market is not positive right now for the industry. Profits are under pressure and cost cut measures are inevitable,” said Sanjeev Zarbade, vice president - private client group research, Kotak Securities.

Siemens AG holds 75% stake in its Indian subsidiary: it owns 13 arms, including Siemens Ltd, with a total business volume of Rs 12,000 crore. Its staff cost accounts for over 9% of sales, which is higher than most of its Indian peers, experts said. “Siemens India is not very lean, so some degree of downsizing would help the company improve efficiency.

But the downsizing may not be as severe as it may be in other high-cost geographies. MNCs like GE, Siemens want to have a stronger base in India because it is low cost and offers a good market. Also, these are vibrant economies which have good long-term potential,” said Amol Rao, an equity analyst who tracks the company at the brokerage Anand Rathi.