Wednesday June 25, 03:15 AM
Year of clean living for adopted German
By Richard Milne
A sign of how Peter Löscher's first year as the only outsider to be chief executive at Siemens (Xetra: 723610 - news) has gone comes
when he is asked who he supported in the recent Euro 2008 football match between Germany, Siemens' home country, and Austria, his country of birth: "I'm for Germany in the football," he smiles.When he took over - unofficially a year ago Wednesday, officially on July 1 - many of the questions were about how this outsider could steady a company shaken by probably the biggest corporate bribery crisis ever. Nobody asks any more, in spite of the incredible complexity of the German conglomerate with its 70 business units and 430,000 workers in 190 countries. Instead the questions are the same to have dogged Siemens' management for decades: when is its financial performance going to match its outstanding technology? "I am extremely pleased with my first year," Mr Löscher told the Financial Times. James Stettler, an analyst at Dresdner Kleinwort, sums up the last year: "What he has done so far is encouraging, but the outcome remains to be seen." Mr Löscher is clear about what his achievements are: in a short time Siemens has adopted a new structure and brought in an almost completely new management team. Out went a coaching system where executives "helped" divisions but weren't responsible for them operationally. In came a system where the chief executives of the three sectors - industry, energy and medicine - sit in the main management board and 15 divisional heads also have clear operational responsibility. The company's operations in 190 countries - many of which had their own administration - have been crunched into 20 regional clusters. The tabular content relating to this article is not available to view. Apologies in advance for the inconvenience caused. The result is a change in the leadership culture at Siemens, he says: "Change is palpable. The individual ownership people are taking over decisions and the speed with which they are taking them . . . Under the new leadership culture somebody takes responsibility for something that happened on their watch. The previous culture was more: 'we will look after you'." But he is also well aware that this is only the first step in a long journey. "This is a multi-year programme . . . Now the key is execution, execution, execution." He also accepts what he hasn't changed - the company's basic strategy of exploiting so-called "mega trends" in infrastructure and healthcare. Mr Löscher says his biggest priority in his first year was on compliance issues. His hard line against bribery appears to have filtered down to the lower ranks, but the chapter can't be closed until a fine is negotiated with the US Securities and Exchange Commission and the estimates vary wildly up to a sum as large as $5bn. He says his priority for the next year is to improve the "global diversity" of Siemens' top management by promoting more international and female managers. But other issues and problems loom large. He admits a €900m ($1.4bn) profit warning lost him some friends among investors when the shares fell nearly 20 per cent in one day. "It is clear we have lost credibility and now it is time to regain it," he says. Investors say he wasn't to blame for the poorly-managed projects that led to the warning as he wasn't at the company then, but they do criticise his communication of this issue and others. "I would say it is 90 per cent positive," says one leading UK investor. The negative, he adds, is something unusual for a shareholder to complain about: "I think he has a slight tendency to say what he thinks the markets want to hear." The investor points to the highly ambitious programme to cut overheads costs, known as SG&A. Siemens is hoping for an absolute cut of 10 per cent by 2010, which given the expected growth in revenues works out as a real cut of 20-28 per cent. "I think he wants a bit too much to be liked," says the investor. Mr Löscher says he wants to push managers. He is also insistent Siemens "deliver a no surprises, no excuses culture". He has all but ruled out large acquisitions after the $7bn purchase of US medical technology company Dade Behring (NASDAQ: DADE - news) irritated investors who thought big deals were out at Siemens. But the holy grail - for management as well as long-suffering shareholders - is a run of quarterly results without negative surprises. Mr Löscher - who says Siemens' order books are as full as they have ever been in spite of the global economic turbulence and a tougher 2009 ahead - says he wants to see four quarters in a row. "That is the hard thing at Siemens. But this will take time. The company is too complex and was managed a certain way for decades." Pressed on when the four successive good quarters could come, he laughs and says: "I am counting every time."
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