German industrial group Siemens said on Monday it planned far-reaching cuts including axing 2,400 jobs in Germany as it showed commitment to a goal of making all its businesses profitable by 2007.
Siemens, one of Europe's biggest employers, said on Monday it would reduce staff and cut 1.5 billion euros ($1.8 billion) in costs over the next two years at ailing IT services unit SBS, and dissolve logistics unit L&A.
SBS President Adrian von Hammerstein, brought in a year ago to turn the unit around, will step down at his own request and be replaced by Christoph Kollatz, previously a manager at Siemens' Industrial Solutions and Services unit, Siemens said.
L&A, which surprised investors by becoming the third of Siemens' 12 units to slide to a loss last quarter, will be broken up, with profitable parts of the business integrated into other units.
Siemens said restructuring costs would weigh on earnings this fiscal year to September and next, without elaborating. It has said operating earnings this year should remain at about the level of last year's for its continuing operations.
Further restructuring could also lead to job cuts at Com, Siemens said, as its telecoms unit struggles despite offloading its loss-making mobile phones business to Taiwanese technology group BenQ this summer.
The company recently brought back executive board member Thomas Ganswindt, who previously cut tens of thousands of jobs at the telecoms networks business, to run the unit after Lothar Pauly left for Deutsche Telekom's T-Systems.
The news went some way towards reassuring investors who have grown sceptical that the 160-year-old conglomerate can continue to keep all its businesses - which range from turbines to trains to lightbulbs - successfully afloat at the same time.
Siemens' stock was up 0.9 percent to 64.50 euros by 1300 GMT, one of the few gainers on a blue chip DAX index dented by an inconclusive result from German general elections on Sunday.
"It shows that management has actually realised there is a sense of urgency, which is not surprising given the margin difference between what they achieved last quarter and what they have to reach by early 2007," said one London-based analyst.
He said he doubted the measures, Chief Executive Klaus Kleinfeld's widest-ranging since he took over from Heinrich von Pierer at the start of the year, would be the end of the story, especially at SBS.
"One-and-a-half billion euros of cost savings are very difficult to realise within six or seven quarters. In the end they'll probably still have to go for a joint-venture partner."
Kleinfeld, who previously ran Siemens' US operations, has been effecting a gradual culture change since returning to Munich headquarters - a delicate job at the German company whose name was until recently associated with jobs for life.
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