Strategy

Siemens Job Cuts Target Gas Turbine Business

The German manufacturing giant will lay off 6,900 workers as it adjusts to the global surge in solar and wind capacity.
Matthew HellerNovember 16, 2017
Siemens Job Cuts Target Gas Turbine Business

German manufacturing giant Siemens announced plans Thursday to lay off close to 2% of its global workforce as it adjusts to the rapid growth of renewables that has hit its gas turbine business.

Most of the 6,900 jobs to be cut, about 6,100, will be made before 2020 at Siemens’ Power and Gas division, which supplies large gas turbines for electricity generation but, as Reuters reports, has been overtaken by the global surge in solar and wind capacity.

Demand for power-plant sized gas turbines (those generating more than 100 megawatts) has “fallen drastically” and is expected to bottom out at 110 turbines a year, compared with total global manufacturing capacity of around 400 turbines, according to Siemens.

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“The market is burning to the ground,” Siemens board member Janina Kugel told reporters.

The Power and Gas Division began responding to the changing market conditions three years ago. “Under its ‘PG2020’ program, it has made considerable progress in the action areas of customer proximity, innovation, costs and organizational efficiency,” Siemens said in a news release.

But the company added that the PG2020 measures “implemented to date have to be further intensified since the scope and speed of the market changes have increased significantly.”

“In contrast to arch-rival General Electric, Siemens was able to shield itself from a sharp downturn in demand for large turbines thanks to an 8 billion-euro ($9 billion) order for power generation in Egypt — the largest in its history,” Reuters said.

“As that order has now been fulfilled, both groups find themselves staring into a future of vast overcapacity, where supply outstrips demand by a ratio of three to one, and prices have dropped 30 percent since 2014,” it added.

In Germany, plans call for an adjustment of around 2,600 jobs and the closure of facilities in Görlitz and Leipzig.

“With their innovative strength and rapidly expanding generation capacity, renewables are putting other forms of power generation under increasing pressure,” said Lisa Davis, another Siemens board member. “Today’s action follows a nearly three-year effort to right-size the business for this changing marketplace.”

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