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Germany

Germany

Analysis - Kaeser aiming to restore calm at Siemens

GERMANY: Joe Kaeser, the new captain at the helm of Germany's flagship technology company Siemens, has said he won't be making any big structural changes to the wind division or other sectors of the group in the short term.

Siemens new CEO Joe Kaeser
Siemens new CEO Joe Kaeser

After the recent profit warning turbulence and bickering among the group's executives, one of Kaeser's main concerns is "to restore inner calm" to the company, he said in his first comments as CEO. He knows Siemens well, having started at the company's components division back in 1980 and worked his way up the ladder to the post of chief strategy officer in October 2004. He became chief financial officer in May 2006, which he has held until now.

But despite his history with the company, it remains to be seen whether his perceived weakness - a financial rather than an engineering background - can be overcome. He at least seems to have taken the first step of recognising the problem. Speaking at the release of Siemens third quarter figures for fiscal 2013, he said: "There will be closer monitoring of what the various company sectors are getting up to, including the technical analysis and feasibility in order to better understand and assess earlier where risks lie."

Under his predecessor Peter Loescher, Siemens' recommended slowing the Energiewende the switch to increasing reliance on renewable energies by setting a target of 40% share of renewables electricity by 2030 instead of the current 50% — which would help Siemens conventional power station sector. Replacing the German feed-in tariff support system — which has allowed the growth of a strong turbine manufacturing sector — with wind project auctions, the winning bidder touting the cheapest electricity price. There is little indication of whether or not Kaeser shares this opinion.

Kaeser's underlying attitude towards offshore wind, a sector where the company is dominant, appears broadly supportive. In April this year he told the Rheinische Post newspaper that "offshore turbines can in principle deliver electricity at competitive prices." The problem was the cable connections to shore which "are currently much too expensive". But he also revealed a lack of detailed knowledge of Germany's renewable energy support system, claiming instead that in subsidies for renewables, Germany "will pulverise EUR 400 billion over a 20-year period that would be better spent on education, innovation and securing Germany's wellbeing."

It remains to be seen how Kaeser will reconcile his sharp criticism of German support for renewables with his willingness to provide a financial contribution to the 468MW Cape Wind offshore wind station in Massachusetts to enable it to qualify for US government support - a project that is to use Siemens turbines.

Kaeser was also forced to deny Siemens was unable to cope with major projects, despite belated completion of major orders for offshore wind converter platforms, marine cable connections, and high-speed trains. "This has not to do with project management but other things," he said.

But he conceded: "When it comes to new business activities we need to ask: Is this something we can do, and what is it that we can contribute?"

Commenting on the offshore converter platform delays, he said: "From today's perspective, it would have been more sensible to join forces with the builders of oil platforms than do the work and shoulder the risk ourselves. We need to first take stock and carry out careful planning before we undertake such contracts."

In terms of the wind sector, the company's weaknesses in terms of onshore may need to be addressed. This is especially true of the company's home market where it is practically non-existent in terms of market share. In the coming months Kaeser may need more than financial nous and inner calm.

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