Siemens siphons off 17,000 jobs
Battening down the hatches
German engineering group Siemens is to lay off 17,000 workers from its 400,000 workforce, including 6,450 jobs in Germany alone, as part of an effort to save €1.2 billion.
Trade union IG Metall had anticipated only 10,000 jobs as part of a broad revamp of the company's operations. The world economy and oil prices are adding to the pressure to act, CEO Peter Loescher told Bild newspaper. "We have to batten down the hatches," he said.
Executives in the middle and upper management will be mostly affected by the job cuts, as Siemens had already had cut thousands of production jobs. In Germany alone, 1,330 jobs may be lost in Erlangen, 900 in Munich, 600 in Nuremberg and 340 in Berlin. The mobility traffic unit will also be affected, according to Die Welt.
The German cuts would be spread over two years. Compulsory redundancies are the very last resort, Siemens said.
Loescher, who took the helm about a year ago, has already squeezed nine operating units into three - energy, industry and health care. Many jobs at Siemens these days are ICT-related. In February Siemens said it would cut 6,800 jobs in Siemens Enterprise Communications, a maker of corporate phone networks.
In related news, Philips is thinking of closing down its LCD factories in Bruges (Belgium) and Dreux (France) and moving its entire LCD production to Eastern Europe.
The Belgian trade union BBTK says it has detailed plans of the pending reorganisation. However, Philips says that at this moment it is only a study. In Bruges, should such a rejig go ahead, 150 to 500 jobs could be affected.
...are going from Siemens Staines?
@ john: or maybe not
I think it is important to profile the competition. They can largely be divided into "other countries with high costs and a stable, law abiding business environment", and "countries with low costs and an uncertain, insecure business environment".
You name three countries, China, Korea, and Japan. Other important countries exist or are emerging, and in generality fit the descriptions I gave above.
China, although costs may rise as time goes on, along with a number of other emerging countries, enjoys an advantage over established countries because workers expect less money, in international exchange terms. This is because of an availability of extremely cheap unskilled labor from the rural areas, which enables it to also provide relatively cheap skilled labor (if the man who farmed your cow is payed $3 for a whole cow, you can afford a lot of steak as an educated chemical engineer on $5/hour). Particularly with china, a wide range of other factors are in play, but I feel the above is important.
This advantage is answered by certain disadvantages. Critical in terms of high tech goods such as the LCDs mentioned above are intellectual property protections. While china has been improving a lot on this front, there is still a valid perception that any important IP being manufactured in china is at significant risk of being stolen. IP laws have tightened, but their enforcement has not been as tight as some might like, and local political influence can have a big effect on the viability of a prosecution. Disregarding some celebrated cases, such as the "fake LG" company who's own employees believed themselves to work for the tech giant, industrial espionage and restrictive "joint ventures" still discourage companies from building the most high tech parts of their devices in both china, and other developing economies. Sharpe for instance manufactures much of its LCDs in china, but produces the screens themselves in either Japan or Korea.
In terms of Europe's rivalry with other "expensive, secure" countries, even the UK is comparatively cheap for japan, and sees some outsource business, yet japan still maintains a strong manufacturing sector. How? one factor is domestic purchasing - domestically produced goods enjoy a better market there than they might here for a variety of reasons including taxation and patriotism.
Another is efficiency, in terms of automation and process. Visiting effective factories in western and eastern countries you are struck by the difference in the use of manpower. In the west, because workers are expensive, it is likely goods might be carried around a warehouse in quantity by a forklift. In emerging economies it is not uncommon to see a chain of workers, who cost less than the lift would. This is not necessarily a bad thing for those economies - these people are cheaper than a forklift, and for the work pays enough that they can send money to their rural families - but it is an insight into how Europe can continue to compete.
Europe cannot count on things like "superior skill" or "efficiency" to compete with emerging economies. The number and quality of graduates in these countries is often greater than here, and "efficiency" will come just as soon as it is cost effective.
Rather Europe should rely on the laws of competitive advantage, and keep in mind that they only work if all sides play fair. In the future, as now, things will work because they work for everybody. Competition is important, but Europe doesn't need to 'win', just to find its place.
Another nail in Western European manufacturing
To be honest, I'm surprised it's taken this long. They can't compete against the Chinese, Koreans or the Japanese, even if they do move production to Eastern Europe. The West prices itself out of the market with minimum wages and high living costs. However, business is business, but for that to happen you need customers.
Go, because it can't be stopped.