Joe Kaeser: Renewing the German Giant Siemens
WHY YOU SHOULD CARE
Restoring vigor at a large, established company is exceedingly difficult. Joe Kaeser may offer lessons on how — and how not — to do it.
By Andre Tauber
The man at the top of the sprawling German technology group Siemens actually has two names. Joe Kaeser is the Americanized version, which he’s used since returning to Germany in 1999 after several years in the U.S. At home, in the small village of Arnbruck in the Bavarian Forest, he’s the Germanic Josef Käser, or simply Sepp. He was born here on June 23, 1957.
Kaeser, a globe-trotting chief executive, maintains strong connections to his home village. He’s a member of the volunteer fire department and a welcomed guest at village festivals. Not exactly the image of a captain of industry, but this could be good cover for a talented and strong-willed tactician, qualities that a year ago pushed him to the top of a company that’s been on a roller-coaster ride as it strives to restore profits.
Having the French government as a major [GE] shareholder will ensure that any U.S.-style productivity and restructuring measures will be extremely difficult…
Siemens is one of the world’s great engineering and technology companies, making a dizzy array of industrial products without which modern life would be inconceivable: power generators, wind farms, transmission systems, subways and railroads, hearing aids, medical imaging machines, home appliances and security systems, just for starters. Sales last year hit 75.9 billion euros ($106.4 billion). Yet the truth is that few companies succeed for more than few decades at the constant self-renewal required to keep up with technology and ahead of the competition. Siemens is struggling against the aggressive and larger American giant General Electric.
Kaeser, a 34-year survivor at Siemens, is determined to put his tired company back into the game. Is this long-time company insider, who hails from one of the most politically and socially conservative regions of Germany, the man to remake this giant global company? Early indications: maybe so. Perhaps out of sheer stubbornness and love for Siemens.
“We cannot afford to miss any opportunities, as we did with telecommunications technology,” he told Der Spiegel magazine last year. “We woefully underestimated the Internet.”
Kaeser’s predecessor as CEO, Peter Löscher, came from outside in 2007 after a high-level corruption scandal, of which Kaeser was one of the few senior-level survivors. The board ousted Löscher last summer after repeated disappointments on profits, amid fears that General Electric was gaining an increasingly large lead on the Munich-based company.
Kaeser swiftly took charge in an effort to help Siemens regain its old self-confidence, though his rough edges continue to poke through in troublesome ways.It was a messy public affair, forcing Kaeser to post a video assuring customers and business partners that the mess was over. “This is not Siemens,” he insisted.
His vigor showed in May after General Electric made a bid for the French technology group Alstom. Just a few weeks after GE CEO Jeffrey Immelt met for talks in Paris, Kaeser went to the French presidential palace to present a joint counteroffer with Japan’s Mitsubishi Group. GE ultimately won its bid, but only after Siemens’ surprise initiative forced it to revise the offer and brought in the French government as a partner.
“The implementation of this deal will keep our two competitors busy for years to come,” Kaeser told employees in a letter. “And having the French government as a major shareholder will ensure that any U.S.-style productivity and restructuring measures will be extremely difficult to get done. … This alone was worth fighting for.”
Sour grapes, perhaps, but also probably true.
Quick action is Kaeser’s strength. Löscher, by comparison, tended to delegate responsibilities and focus on management and important customer contacts. Some people doubted his grasp of details. After 34 years at the company, Kaeser seems to know everything.
He has yet to learn that every word from the CEO of a large group is serious business.
When he took over last summer, he set a strategy for restructuring. For nine months he worked out the details of what amounted to a revolution. Then without further ado, he scrapped four overarching divisions (energy, industry, health care and infrastructure) introduced by Löscher, aiming for a leaner management. Subdivisions were further merged, and some might be sold off. Expected cost savings: 1 billion euros by autumn 2016.
The reforms centralize power around Kaeser. In past years, the Siemens divisions had developed into principalities whose rulers sometimes aspired to take the throne of the king. The ambitious Siemens board member Michael Suess, responsible for the energy business, has left the company. Former Shell manager Lisa Davis will steer the energy business from the U.S., where Siemens is interested in shale gas development.
While underlying profitability has been strong, the company has continued to suffer large write-offs from energy infrastructure projects in the North Sea and elsewhere that have turned sour.
Kaeser cultivates the image of a casual manager who acts boldly. But it gets him in trouble, as he has yet to learn that every word from the CEO of a large group is serious business.
Kaeser caused another ruckus when he told analysts in New York that 11,600 employees would be affected by the already announced restructuring. It was an explosive number, but Kaeser didn’t realize this until he returned to Germany and got off the plane to a storm of protest. By then it was too late. He’d already been accused of lacking sensitivity in his dealings with employees.When he visited Russian President Vladimir Putin at the end of March, at the height of the conflict about Russia’s takeover of Crimea, German television filmed him congratulating Putin on the Olympic Games. He later gave a TV interview in which he smiled and described the Ukraine crisis as “short-term disturbances.” This brought a storm of criticism in Europe, where he was accused of sabotaging political efforts to put Russia under pressure. Indeed, it likely contributed to Putin’s underestimating the eventual strength of European reaction to his aggressive moves.
In the end, Kaeser might not care if the German public thinks he’s a good diplomat, if he can restore growth and profitability and get in a few good licks against General Electric.
- Andre Tauber, OZY Author Contact Andre Tauber