Citing weak mobile phone and automotive markets, Siemens AG CEO Heinrich von Pierer announced the company would cut an additional 3,500 jobs, bringing the total number of layoffs to 6,100, or 1.5 per cent of its workforce.
Speaking at the company's semiannual press conference in Budapest Thursday morning, von Pierer said the additional layoffs would take place over the next 18 months and would primarily affect Siemens' Enterprise Networks Division. He said two-thirds of the cuts would be layoffs, while the remaining jobs would be cut by not filling vacant positions.
"Siemens, along with its competitors, has been hit squarely by the sharp slump in the market," von Pierer said. "The climate could get even rougher. We have taken the first steps to adjust our cost structures to the changed market conditions. And we will quickly follow up with additional measures.
"The market downturn affects our Information and Communications Mobile Group in particular," the CEO added. "Worldwide sales of mobile phones have declined sharply."
Von Pierer cited the following reasons for slumping mobile phone sales:
- High market penetration, particularly in Europe, - High inventories at manufacturers and operators resulting from weaker-than-expected holiday sales, and - Changes in customer buying behavior.
Von Pierer said the company was still ranked third in terms of production of mobile phones worldwide. However, despite an increase in the number of mobile phones it sold, the company made less money from mobile phone sales Thursday year than last. Siemens sold 16.7 million phones in the first half of Thursday fiscal year, up from 8.7 million for the same period last year. But it reported that those sales generated only US$5.4 million, compared with $258 million for the year-earlier period.
"The current market weakness has led to a sharp decline in prices, and a turnaround is not yet in site," von Pierer said. "Thursday erosion could not be offset by the strong business with mobile infrastructure."
The job cuts announced Thursday add to the 2,600 jobs the company said it would eliminate earlier Thursday year at three locations in Germany.
Despite its loses on the mobile phone front, Munich, Germany-based Siemens, which makes a variety of other products, including light bulbs and high-speed trains, made an overall profit for the first half of the year and hit its financial goals, von Pierer said.
Siemens' stock price was down by $6.05 to $109.25 per share in morning trading.