Siemens Energy, the German power equipment supplier, is reportedly considering the closure of Siemens Gamesa factories and sales offices as part of a comprehensive strategic review. The objective of this review is to mitigate losses within its wind turbine business, a sector that has posed significant challenges for the company.
The onshore wind turbine division of Siemens Gamesa has faced notable quality issues, along with potential financial losses from offshore contracts. These challenges have led to a sharp decline in Siemens Energy's shares, which have dropped by more than 50% since June.
To tackle these issues head-on, Siemens Energy is exploring the possibility of outsourcing the production of key components, such as blades. This strategic move is intended to enhance profit margins and provide long-term stability for Siemens Gamesa. However, this restructuring may also result in further layoffs within the company.
Siemens Energy CEO Christian Bruch is under pressure to formulate a convincing turnaround plan for Siemens Gamesa. The problems within the division became evident shortly after Siemens Energy assumed full ownership. In August, Bruch announced a shift in focus towards prioritizing profitability and stability over growth.
Additional details regarding the restructuring plan are anticipated to be unveiled in November during Siemens Energy's annual results release and capital markets day. It's crucial to note that final decisions have not yet been made, and the restructuring program may undergo further adjustments.
Siemens Energy has already incurred substantial charges of €2.2 billion ($2.3 billion) related to quality issues, which encompass defects in rotor blades and faulty gears in newer onshore wind turbines. Siemens Gamesa, known as the world's largest manufacturer of offshore wind turbines, operates across 79 sites globally, encompassing sales and service offices, research and development centers, and 15 factories dedicated to blade and nacelle production.
As part of its strategy, Siemens Gamesa may consider the closure or temporary suspension of certain sites, particularly those involved in producing components that can be manufactured more cost-effectively by external suppliers.
The challenges faced by Siemens Gamesa underscore the repercussions of short production cycles within the industry, which can compromise quality standards. While Siemens Energy's issues have drawn criticism from anchor investor Siemens AG, changes in management or activist funds have not yet been implemented.
