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Siemens Said to Plan 7,400 Job Cuts as CEO Reduces Costs

(Bloomberg) -- Siemens AG plans to cut about 7,400 jobs worldwide as Chief Executive Officer Joe Kaeser tries to reduce costs at Europe’s biggest engineering company, said a person familiar with the matter.

The cuts, representing about 2 percent of Siemens’s global workforce, may be announced as early as this week, two people said, asking not to be identified as the plan is not public yet. About 3,300 of the job reductions may affect Siemens’s German operations, two people familiar with the matter said. A Siemens representative declined to comment.

“They are mostly white collar employees with higher per head salaries and indirect costs,” London-based JP Morgan analyst Andreas Willi said by e-mail, citing computers and office space as associated costs. The “number makes sense and is in-line with what I expected.”

Kaeser said last year that Siemens needs to eliminate jobs as he seeks to slash about 1 billion euros ($1.1 billion) in costs by creating a leaner divisional structure and simplifying regional operations. He had said that as many as 11,600 positions could be affected in the overhaul, and that the final headcount loss would be negotiated with labor representatives.

Streamlining Siemens

The shares pared earlier declines and were trading 0.2 percent, or 19 cents, lower at 95.35 euros as of 1:28 p.m. in Frankfurt. That values the company at 84 billion euros.

The cuts come at a time when Siemens’ health-care and energy generation divisions, once the prized assets at Europe’s largest engineering company, risk jeopardizing Kaeser’s turnaround plan.

Profit at the two units fell a combined 27 percent, dragging overall first-quarter profit down 4.1 percent to 1.8 billion euros, the company said last month. That’s a far cry from 15 months ago, when those businesses helped offset declines elsewhere at Siemens.

Still, Kaeser has been focusing Siemens on energy generation and supply, buying oil-and-gas equipment maker Dresser-Rand Inc. and the energy operations of Rolls-Royce Holdings Plc last year.

The decline in the price of oil has led some analysts and investors to question the wisdom of the Dresser-Rand deal, which was priced at 14.1 times the average expectation for 2015 earnings before interest, taxes, depreciation and amortization. Brent crude has fallen about 50 percent to less than $50 a barrel since the acquisition was announced.

Kaeser announced a separate 15,000 job cuts in Sept. 2013, a further 1,200 losses at the power and gas division in December, and has sold the company’s hearing-aid, hospital IT and microbiology units. About 18 percent of its 72 billion euros annual revenue is generated by loss-making units, he said last month.

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