Siemens cutting 4 percent of workforce
July 9, 2008 by Tisa Silver
Filed under Finance
Siemens AG became the latest company to announce massive layoffs in the wake of an economic slowdown.
The German engineering and manufacturing powerhouse announced that it will slash 16,750 jobs in order to cut costs and restructure its operations. The job cuts represent just over 4 percent of the company’s global workforce. Most of the job cuts will come from administrative positions with the remainder coming from efforts to streamline operations.
The company has businesses operating as 70 regional companies and 1,800 separate legal entities. Plans for the restructured business will consolidate the companies into 20 regional clusters and the entities to below 1,000.
The changes are expected to reduce costs by about $1.8 billion by 2010. Coincidentally, Siemens is under investigation for a corruption and bribery scheme involving $1.9 billion in ”unclear payments.” Those payments were allegedly used to bribe clients for orders.
Shares of Siemens traded up less than one percent this morning.
Cutting jobs is clearly the quick and easy fix. In an economy on the brink of recession is this quick, easy fix possibly making the situation worse? Couldn’t these companies do what Siemens is doing (evaluating their processes and cleaning them up to reduce costs) without cutting so many jobs. I would bet that all of these companies have lots of room for improvements and can cut cost drastically. Regardless of the industry the company deals in you would imagine they have room to improve, after all no one is perfect.
People are always so quick to just take the short cuts. Cutting jobs, although beneficial to the costs of the companies, takes income out of the hands of the public…in effect causing more damage to the economy. Companies would probably be surprised by how much they could save year in and year out by changing the way the do things. And these changes would be permanent, where as cutting jobs is just a temporary fix until they need more workers when the economy turns around and now they increase their cost even more, and unnecessarily, to train or retrain everyone they hire.
I understand if companies cut jobs if after considering all other possibilities costs are still too high. But couldn’t these companies make the effort to improve themselves instead of taking the easy way out and potentially destroy families and possibly push the market further in the wrong direction?
It’s interesting how the bribe amount of 1.9 is nearly the same as the 1.8 billion the company is saving. I doubt there’s any connection, but it would be interesting if there was.
Obviously corporate corruption is unexcusable and the parties involved should be penalized.
Not sure how it is going to legally play out since it is a German company. However, since it does trade on the NYSE, it should have had audit and compliance, and transparency requirements, especially post sarbanes, in order to deter transactions such as this, and actions such as bribery from taking place.
Pertaining to the job cuts however, it is difficult to judge whether it is a proper or an improper action based off of skimming recent articles.
But it is true that whenever job cuts are inacted anywhere, the public becomes enraged, and employees(understandably) become upset.
Sometimes though, when a company is in bad shape, there is no other option other than to lay off workers.
Whether you espouse a stakeholder or shareholder point of view, it is important to realize that sometimes, layoffs are a necessary course of action for a company, in order to benefit, not just shareholders(which are mostly pension funds) but the stakeholders as well.
I say that because, if a company is indeed in distress, and has a poor bloated structure, its attempts to save employees now, could mean a much larger number, or even the all employees, could lose their jobs down the road.
As a personal opinion, though, I think it is important that corporations assist in the transition of layed-off employees.
This is no surprise. As long as our economy is doing as terrible as it is, i’m sure there will be alot more layoffs than this. Hopefully your on good terms at your job because it could be you next.
Are any companies in the world not going through some sort of corporate scandal? It seems every day there is some person in a company doing illegal things. It seems like a good idea, but now days, due to new regulations, everyone seems to just get caught.