Verdict on the nine-month figures from Siemens AG – net profit up 13% at the equivalent of $1,013m – was that the company is rebounding according to plan, but is still struggling to reduce its large and expensive domestic labour force, analysts told Reuters. Orders were a little bit disappointing, showing slightly slower growth than last year’s third quarter, which itself was not particularly good. But basically there were no surprises here, said Jonathan Shantry at Credit Lyonnais in London. Siemens’s basic problem is its huge German labour force, he added. The strong mark, high wage agreements reached by German engineering unions earlier this year and the inflexibility of the labour market in Germany add up to a significant problem, Shantry said. The domestic labour force declined to 215,000 as of June 30 from 218,000 on September 30 1994, but was still larger than the 162,000 the company employed abroad, which was up from 158,000.
Average hourly cost
Underlining the problem, chairman Heinrich von Pierer said at the announcement of the figures in Vienna that the average hourly cost for a German worker was 10 times the level in the neighbouring Czech Republic, while Southeast Asia offered the combination of low labour costs and high technology, which Siemens must either use to its advantage or face an increased threat from competitors who did. The company now expects to cut its workforce by 6,000 this year, down from an earlier forecast of 12,000. Sharper cuts in Germany are being partly offset by increases in employment in other countries. Siemens stood by its forecast of a 20% rise in net profit before extraordinaries in the full year to September 30, and said sales and orders would rise more strongly than expected despite the strength of the mark – with the booming world market for semiconductors leading the way: in the chip division, nine-month sales were up 36% at $2,700m, and incoming orders climbed 39% to $2,680m. Siemens Nixdorf Informationssysteme AG was also credited with contributing to the improvement, with nine-month sales up 6% to $6,150m and orders up 12% to $6,585m. Siemens-Nixdorf is now expected to make a profit in the full year to September 30 after its $250m loss last fiscal. Overall, domestic sales rose 10% to $18,739m but international sales rose only 0.6% to $24,817m. Sales of private communication systems rose 13% to $3,690m and orders rose 14%, also to $3,690m. Von Pierer repeated his forecast that the company would make a group net profit of $1,450m for the full year, and In spite of currency effects, our business volume in 1994-95 will be about $725m higher than expected. We are sticking to our forecast earnings and to balancing out last year’s dent, he said. Orders would rise to between $65,010m and $65,730m he said, while sales would rise to between $63,560m and $64,280m. Sales in the first nine months rose 4% to $43,480m, orders were up 3% at $48,320m. Siemens also gave more details of its co-operation with Amper SA, which include a joint venture to make telephones and extensions, in which Siemens has 66%, 51% of Amper’s Elasa unit, and a 10% stake in its Statos subsidiary. Siemens was actually in Austria to announce that it was taking over EH-Schrack Components AG through Siemens Austria. The company employs 1,250 making alternating current power relays.
