Siemens President Heinrich von Pierer is in a good mood now, because under his leadership, the German-based manufacturing giant has been moving in the right direction for some time: this fiscal year First-quarter earnings grew nearly 40%. Moreover, since the German economic downturn after 2000, the situation inside and outside the company has begun to improve.
"If you look at the global situation, you will find that everything seems to be slightly better now. The attitude of political and business leaders is more optimistic," von Bühler said in an interview at the Munich headquarters. Mr. von Bile's optimism is based on the company's global reach, which is very broad. Siemens operates in 190 countries around the world, employs 417,000 people, and produces a wide range of products, from trains to mobile phones. Siemens is the world's largest manufacturer by sales, excluding its automotive business, with sales of 74.2 billion euros ($92 billion) last year. In the automotive industry, the business scale of General Motors, Ford, DaimlerChrysler and Toyota exceeds that of Siemens.
There is no doubt that Mr. von Bühler is optimistic in part because the global economy is improving, but he could also argue that another reason is that the 10-point restructuring plan he embarked on from 1998 has Get results. This plan initiated a series of the largest changes in the 156-year history of Siemens. In the name of delivering shareholder value, companies have divested many businesses, performance reward systems have been introduced to management, and companies have begun efforts to expand beyond Germany. These moves paved the way for Siemens to go public independently in the United States.
Von Bile’s reforms won the praise of at least one long-time rival, Jack Welch, who stepped down as chairman of General Electric (GE) in 2001. General Electric in the United States has always been Siemens's archenemy. “He was very smart and he knew that a lot had to be done to change Siemens, and he took action incrementally, with the attitude of a marathon runner, not a sprinter,” Mr. Welch said. But both inside and outside Siemens, people still worry that Siemens, in its current situation, will not be able to take full advantage of the opportunities brought about by the economic upturn.
Controversy among senior Siemens executives reflects this concern. They said the company was pursuing greater growth, either through further restructuring of the group or through one or more larger acquisitions. Some people have suggested that Siemens currently has a management committee of 12 people, many of whom are department heads. If the company wants to make its operations more flexible, it may be replaced by a smaller management team, and the new team should be less involved in the company's daily operations. Other possible avenues include merging the company's large fixed-line telecommunications equipment unit with its mobile-phone division, or launching a massive medical-equipment deal. As they envision the company's future, Siemens executives have been keeping an eye on GE's recent deals. In power stations, lighting, trains, home appliances and medical systems, GE is neck and neck with Siemens.
In particular, Siemens managers have been studying GE's acquisition of Amersham. General Motors acquired the British biomedical company for US$9.5 billion in October last year. Many people believe that this transaction will change General Motors' own medical equipment business. General Electric is the world's most valuable company, and its business war with Siemens has lasted for more than a century. For Germany's Siemens, the main impact on almost all the company's affairs is: competition with General Motors. However, although Siemens has made some progress in recent years, which has been reflected in the rise in its profits and stock prices, its profitability is still unable to match that of General Motors. GE's industrial business has an operating profit margin of 14.8%, nearly three times higher than Siemens'. Siemens' market capitalization is 56 billion euros ($69 billion), dwarfing General Motors' market value of $328 billion. A large financial services arm boosted GE's ratings.
Although Mr. von Bile envies GE, he believes that financial analysts always think GE's best interests without basis, and GE often unfairly benefits from it.
Logistically, he said, GE's acquisition of Amosian "makes sense," but added, "If we were doing something like this, I think we would be criticized for overpaying. "However, in Mr. Feng Bile's view, it is still possible to conduct a large merger and acquisition transaction. When asked whether Siemens would be interested in "transformative" initiatives such as General Electric's acquisition of Amosin, he said: "Why not? We are not opposed to this idea."
He He declined to specify what such a deal might entail, but he made clear that whatever happens going forward, Siemens will inevitably have fewer employees in Germany, partly reflecting the country's high wage costs. Siemens currently has 167,000 employees in Germany, 86,000 fewer than when he first took power 12 years ago. "I care about social welfare in Germany," he said, "but we have to improve our cost situation in Germany, because right now, our costs (in Germany) are higher than many other places."
von Bile Mr. Wang found that it made sense to consolidate some industrial businesses, which to some looked like an old-fashioned conglomerate. But that's not the case, he claims, because that view ignores the fact that many businesses are united by their shared interests in information technology (IT). "We are first and foremost an IT company. We have created highly specialized processes [in IT] that can be applied to improve the performance of our business units. We have 30,000 software engineers, more than any other company... …No other company in the world has our depth of IT knowledge, so we have unlimited opportunities to innovate on these technologies and grow further in this area.”
Within the company’s vast telecommunications business, Siemens also puts IT to good use. The telecommunications business has just begun to return to profitability after a long period of losses. The company has been rolling out a series of new software-based switching systems that will integrate voice and data communications. This is a highly competitive field. But some analysts believe its software-based technology puts Siemens ahead of telecom rivals Ericsson, Cisco Systems, Nokia, Alcatel and Avaya. In particular, Siemens has made good progress on Lifeworks software. No matter where in the world individual consumers are, and whether they use landline networks or mobile phones, the software will help with the complex task of delivering phone and data communications to users.
In the field of mobile phones, Siemens has made good progress, but it is generally believed that the company is weak in third-generation mobile technology. Siemens is currently the fourth largest operator in terms of mobile phone sales in the world, but it is almost the same as Samsung. Observers believe it would be beneficial for Siemens to form an alliance with Japanese mobile phone makers such as NEC, Matsushita or Sanyo, potentially boosting its expansion plans in Asia while also strengthening its technology position.