ZURICH (Reuters) - Siemens (SIEGn.DE) has reached an agreement in principle with trade unions about its plans to cut jobs and restructure its struggling Power and Gas (PG) and Process Industries and Drives (PD) businesses in Germany, it said on Tuesday.
The German industrial company is targeting savings of several hundred million euros in the program designed to tackle plummeting demand caused by a switch away from fossil fuel generated electricity to renewable energy sources.
The downturn has dragged down Siemens’ results in recent quarters, with demand for large gas turbines not expected to recover in the near future, according to analysts.
Siemens’ rival General Electric (GE.N) has also been hit, and last year announced plans to axe 12,000 jobs at its power business.
Power and gas orders at Siemens are expected to drop 23 percent during the company’s second quarter, with results due on Wednesday, while profit from the division is forecast to plunge 62 percent, according to a Reuters poll.
In November, Siemens said it would cut 6,900 jobs worldwide, mainly at the PG division.
Around 3,400 of the jobs will go in Germany.
Concrete details of the deal will now be negotiated in the coming months in Germany, Siemens said on Tuesday. Although the company was seeking voluntary job cuts, compulsory redundancies could not be ruled out, it said.
“Last November we told you how dramatically and sustained the markets, particularly with regards to fossil fuel energy generation, have been falling ... and how we want to tackle this situation,” said Janina Kugel, Siemens’ chief human resources officer and member of the managing board.
An agreement was made with German unions on Monday night after both sides agreed on the need to reduce costs, Kugel said.
Siemens’ plants in Berlin, Duisburg and Mulheim will see job cuts, along with Erfurt after an attempt to sell the site failed.
Operations in Offenbach and Erlangen in western Germany will be combined, with the Offenbach site eventually closing. Siemens said it would keep its Goerlitz plant in eastern Germany, which will be transformed into a center for steam turbine production.
The company will also look into a possible sale of its operations in Leipzig.
As part of the deal, Siemens said it would invest an extra 100 million euros to develop skills for those whose jobs have been affected by the changing industry, including increased digitalization.
German unions said they were pleased the originally planned plant closures had been avoided. Under the original proposals the Goerlitz and Leipzig plants were likely to close.
Excluding its services business, the PG division has around 30,000 employees worldwide, of which 12,000 are based in Germany.
The cuts are separate from the temporary shutdown at PG sites around the world reported by Reuters on Monday.
Around 30,000 workers globally will be affected by the week-long shutdown, which will take place in May or June.
Reporting by John Revill, additional reporting by Alexander Huebner; Editing by Michael Shields and Mark Potter