Siemens - American manager's view

Although it also has diverse operations in many other markets, Siemens - current revenues about $75b - is easily the largest industrial automation company in the world.

What is it like working for Siemens? I asked several managers who have worked fairly high up in the US Siemens organization. Here is a summary of their collected insights:

Management Hierarchy

Siemens is the quintessential German company - all major decisions are made in Germany. Country mangers are viewed primarily as sales managers who implement strategies defined in Germany. The head of the US "holding company" is located in New York, N.Y. Automation & Controls in the US is part of Siemens Energy & Automation, based in Alpharetta, GA.

Planning & Implementation

In general, Germans are more thorough in analysis and planning than other Europeans and Americans. They create a detailed plan which is 'engraved in stone' with expectations that it will be met regardless of change. By comparison, Americans tend to create a high level plan and then adjust with new information. Siemens US management operates in step with the German stereotype.

Financials

Global financials are shown in the annual report (available on the Siemens website). US figures are consolidated for all US Siemens businesses. Profit objectives are low by US standards; country managers are expected to generate 5-10% EBIT, recognizing that most products are manufactured in Germany and transferred to the US for local sales. The profit is retained in Germany via arms length transactions which meet US GAAP. There is a great emphasis on improving operating results, including EVA performance. Siemens is now listed on NYSE, which will be interesting to watch.

Engineering-driven

Historically, Siemens has been an engineering company with the expectation that technology advantages will drive success. Most products are manufactured in Germany and exported to the country sales organizations. Siemens is still learning how to be a marketing company. Geographic markets are handled via indirect sales channels (OEM's, Distributors, System Integrators, Consulting Engineers, etc.), which has limited end-user influence. However, Siemens HQ has begun to realize this and they have created a global account management network to manage some 50 to 75 global accounts.

Automation Products

Siemens has process automation and control spread across four major business units: Automation and Drives; Industrial Solutions and Services; Power Generation; and Building Technologies. The tremendous industrial products portfolio is under exploited: DCS, PLC, Drives, Motion Control, Fieldbus (Profibus) and more.

Software

Siemens has it's own version of control software called WIN CC which is the platform for PCS-7. Siemens recently acquired ORSI in Italy and also has a "soft" PLC software called WIN AC. Software products are a key part of the business strategy for Siemens, but development is typically internal, versus acquisitions.

US Acquisitions

Siemens has made several automation and control acquisitions in the US market over the past 3-5 years - Applied Automation, Moore Products, Milltronics - to expand market access. Past acquisitions like Texas Instruments (PLCs) and Westinghouse (Power Generation Business Unit) are viewed internally as financial successes, but have not boosted Siemens out of the second tier category in the US. They always seem to have difficulty with the integration of US acquisitions, lacking the integration structure and methodology of a GE.

Pinto Prognostications

Siemens has the financial strength to acquire almost whatever they wish. So if Invensys, Honeywell or others become available, Siemens will always be a serious and viable buyer, looking for more market-share. It should be noted that a move to acquire Rockwell Automation would probably trigger anti-trust actions.

Siemens website

US Analysts - Siemens Financial Summary

Stay tuned....

Extract from JimPinto.com eNews - 9 May, 2002

I've had a lotttt of feedback and commentary on my review of Siemens, and of the Japanese automation players. Here are some additional noteworthy inputs which I thought you would enjoy.

In JimPinto.com eNews (April 18, 2002) I had presented a senior US Manager's view of Siemens. It is clear that the European's have a completely different view.

Mathieu van den Bergh [mathieu-van-den-bergh@cox.net] who is originally from the Netherlands, now lives in San Diego, CA. and travels to Europe frequently, had this to say about Siemens:

"I think your view of Siemens is a little dated; they are far more flexible now than they were 10-15 years ago.

"Several of the large German conglomerates have had difficulties with large acquisitions (lately BMW and Daimler were added to this list) and thus they are more interested in purchasing smaller companies with more innovation as compared to buying sales volume and market share.

"Whereas Siemens hasn't had the performance of GE, they certainly haven't had the creative accounting of GE, and the profit they report is real. Nevertheless, Siemens (deliberately ??) missed out in the services and financial sector, where GE has added so much to their portfolio. On the other hand, Siemens grabbed major chunks of telecom and did very well in that - although it hasn't been that good for them the last 12 months or so. Of course, GE's performance has declined with big insurance "hits" ($ 600 million reserved for 9/11 and associated events) and the aircraft engine business is under pressure as well.

"Last week, one of the German radio stations had a morning show, featuring the European GE VP (headquartered in Munich) who's main job it is to start building a reasonable presence in Europe. GE is a virtual unknown in European consumer markets, and they wish to change that. But the VP acknowledged that if you asked the German public their opinion about GE, 9 out of 10 just wouldn't know the company. Maybe the same is true of Siemens in the USA."

Extract from JimPinto.com eNews - 3 June, 2002

Industrial automation - more on Siemens

"I had the somewhat unique experience of being Siemens US employee, at Siemens Energy & Automation, reporting directly to one of the German divisions. My job was to global responsibility for the business relationship between Siemens and one specific customer. I got a very different perspective on Siemens.

"Siemens is a giant trading company. They have operations in over 150 countries around the world. Each of those country operations is basically independent. Germany requires that each country remit money on an annual basis, with the amount for the succeeding year decided at the end of the previous year. As long as a country operation sends in the required amount, Siemens Germany can do very little to exert influence on how that country operates. The one lever they do have is to send money to the country for use in internal programs. So what you end up with in certain situations, is Siemens Germany sending money to Country A, which doesn't use all of it as intended, and Country A ends up sending back money that originally came from Germany as a program incentive, as part of its required contribution to Siemens Germany. In essence, Siemens Germany gets its own money back.

"I had more than one upper level Siemens manager express the wish that Siemens were an American company, so that the parent could tell the child what to do.

"Because Siemens Germany is so successful in all of Europe, and because there is so little contact between German management and American customers, there is a complete lack of understanding as to why Siemens isn't more successful in the US. I once had a Siemens Germany sales person say that when they call on a customer in Europe, they simply say "We're Siemens and here is our technology"; and the customer responds with "Where do I place my order?" In America, the customer's response to "We're Siemens!" is "So what?" And, Siemens has no idea what to do with that response!

"In my opinion, the bottom line is that technology doesn't drive business - relationships drive business. There is a long-standing relationship between Siemens and the customer base in Europe that does not exist for Rockwell, GE, etc. By the same token, that relationship exists in America for the Americans, but not for Siemens and the Japanese companies.

"Simply buying American companies doesn't assimilate the relationship for Siemens. Instead, it adversely affects the relationship for the acquired company because Siemens doesn't know how to adopt the American culture and develop the American customer base."

The former Moore operation has been assimilated into various Siemens business units with heavy workforce reductions. Anyone who had DCS sales, marketing, development, and operations knowledge is now gone. The APACS systems group was folded into a new unit called Process Instrumentation Division with the mission to provide systems solutions to the process industries (APACS, PCS7, PLC, and Drives). Total confusion and mis-direction followed this organization that was put in place in early 2001. Now SE&A has disbanded the Process Instrumentation Division in a cost cutting move. People and products are once again being re-assigned.

The German parent business unit, Automation & Drives, has been the most profitable unit within Siemens in the past, but global profits have been halved so major cost cutting is required. The President and CEO of SE&A, USA is rumored to be going out by the end of the Siemens fiscal year, Sept. 30.

Unfortunately, in the industrial automation business, the sorry Siemens saga is being played out in similar moves at Invensys, Honeywell, Rockwell and ABB. It seems that only well-managed Emerson is escaping the negative hits.

The JimPinto.com WEBLOG provides a channel for inputs, comments, questions, answers on all of the issues discussed in the regular eNews, and on the JimPinto.com website. Read all the latest 'chat', or contribute your own comments.

Siemens news and views on the Siemens Weblog

Chris Carnavos [chris.carnavos@accelics.com] CEO of Accelics provided this:

"As for the Japanese-German mind-meld, when I left ABB, I gave the leader of my ABB business unit in Mannheim a good-bye present. It was a globe of the world, with only a map of Germany on it!"