Germany's Siemens AG announced plans to eliminate an additional 4,700 jobs at its Osram lighting unit after it injected 699 million euros ($908 million) in capital at the subsidiary it is preparing to spin off next year.
The job cuts, primarily outside Germany, come on top of 1,900 positions that Osram already reduced in fiscal 2012 and will reap 1 billion euros ($1.3 billion) in cost savings as the market for traditional light bulbs shrinks, the company said Friday in a statement. In total, the job losses at Osram will amount to about 7,300 positions. The measures will cost a “mid-three digit million figure” through 2014, with the savings realized in full a year later.
Siemens said this week that it would spin off Osram next year and retain about a fifth of the company, after realizing that investments to keep pace in the lighting market would be too great for the engineering company to shoulder. Siemens trails Royal Philips Electronics NV in the market for lighting, which is tilting toward LED technology based on semiconductors.
“Personnel increases in the future fields will only partially compensate for the change in the traditional businesses,” Osram Chief Executive Officer Wolfgang Dehen said in the release. Osram had about 39,000 employees as of Sept. 30.
Siemens undertook the capital increase at Osram in the fiscal year ended Sept. 3, the company said in its annual report published Nov. 28. Spokesman Wolfram Trost said the transaction is part of Chief Financial Officer Joe Kaeser’s pledge to ensure Osram will be eligible for a credit rating between ’A-’ and ’BBB+,’ declining to provide further details on Osram’s balance sheet.
The parent company had tried to sell shares in Osram to the public earlier, before deciding in favor of the spinoff.
The majority of lighting positions will be lost by selling factories abroad, mainly smaller plants or facilities making products that have reached the end of their life cycle, Osram said. In Germany, three sites will be affected, including in Berlin and Munich, where Siemens is based.
Siemens estimates the total lighting market will grow by about 5 percent each year to 2016, with the LED market volume to quadruple by then to 37 billion euros, according to figures compiled by McKinsey & Co. The market for traditional lighting products will fall by 15 percent in that time, the data show.
Both Siemens and Philips have sought to push into the LED market, with Siemens opening a plant in China that will eventually employ 1,700 people. Philips, based in Amsterdam, has also deepened job cuts at lighting facilities, and the company announced reductions at a factory in Belgium this month.
Sales of LED products at Philips rose 51 percent in the third quarter and made up 24 percent of total lighting sales.
Siemens, Europe’s largest engineering company, is preparing Osram for a spinoff to be approved by shareholders on Jan. 23. The company plans to list 80.5 percent of the lighting unit, and shareholders are to receive one Osram share for every 10 Siemens shares they own.
The company announced this week that it would buy the rail subsidiary of Invensys Plc for about 1.74 billion pounds ($2.79 billion) and seek buyers for postage and baggage-handling operations that no longer fit its portfolio.
© Copyright 2015 Bloomberg News. All rights reserved.