Siemens plans layoffs in US auto electronics

Sarah Knight

FRANKFURT: Siemens AG is planning job cuts at its automobile electronics
units and could target plants in the United States which have been hardest hit
by an economic slowdown, a union official said on Monday.

Siemens VDO, which said last month it was considering job cuts as part of a
savings and restructuring program, generates about 25 of its sales in the United
States.

"It looks like all the Siemens VDO sites could be affected, but
particularly those in the US, where business has been hardest hit," said
Guenter Lorenz, a spokesman for engineering union IG Metall. Siemens VDO
reiterated last month's statement that there could be job cuts as it seeks to
restructure the loss-making firm but a spokeswoman on Monday declined to say how
many positions would be hit.

Lorenz also said the union was in negotiations with the management and it was
not possible to say how many jobs will go. Last month, IG Metall estimated as
many as 2,000 could be axed, remarks the company described as speculative.

Faltering demand in the automobile sector and rising prices for electronic
components have hurt the unit, which was created in May following the merger of
Mannesmann Atecs VDO automotive electronics business and Siemens automotive.

On Monday, magazine Der Spiegel said the Siemens group planned to shed a
further 3,000 jobs from its administrative staff and its logistics and
automotive divisions on top of the 15,000 already announced in the telecoms and
IT units.

Siemens AG chief executive Heinrich von Pierer said on Monday there was
nothing new in the Spiegel report but declined to give details. "It's old
wine in new skins," he said on the margins of a conference in Munich.

Asked if Siemens had ruled out further job cuts he said: "I can't give
any comment to that. We will take a position on this issue on November 14."
The group is scheduled to report preliminary results for the fourth quarter and
full year to the end of September on that date.

Siemens VDO's spokeswoman said on Monday that it was taking a closer look at
its product portfolio to see which lines could be strengthened through joint
ventures or alliances, and which could be shed. She declined to comment on the
strength or weakness of each of its five units - powertrain, information and
cockpit, communications and multimedia, safety and chassis and car body.

Analyst Frank Rothauge at Bank Sal. Oppenheim in Frankfurt said the company
was likely to want to build up its cockpit and navigation systems as well as
fuel injection systems. Rothauge said Siemens VDO was likely to be less
interested in simple electronics.

Joint venture

Siemens VDO's joint-venture with Yazaki in the wiring harness business --
unveiled earlier this month -- was an indication of how the company plans to
focus on core competencies, the spokeswoman said. Siemens concentrates on
electronics while Yazaki on production.

The German company also plans to improve efficiencies by making better use of
production capacity and transferring high cost production to lower cost sites,
she said. It has said around 400 jobs could go from its Wetzlar plant north of
Frankfurt as it transfers production of radio and navigation systems to the
Czech Republic.

The company has targeted an operating margin on sales of 5-6 per cent by 2003
and profitability in 2002. Sales are seen climbing to seven billion euros ($6.28
billion) next year, from an expected 5.5 billion euros this year, she added.

It is seen as a key division for the Siemens group as demand for electronics
in cars grows. Some industry sources have said Siemens may be interested in
buying parts of tyre and car parts group Continental AG. A wave of consolidation
is seen among suppliers in Germany amid overcapacity and a new German law next
year, which will allow shareholders to sell major stakes tax-free.

"We are waiting to see what Siemens' response will be," said Russ
Mould, an analyst at UBS Warburg Dillon Read in London.

(C) Reuters Limited.