Siemens Names Kleinfeld Chief Executive Starting 2005 (Update4)
July 7 (Bloomberg) -- Siemens AG, Germany's largest engineering company, named Klaus Kleinfeld, who led a turnaround of the U.S. unit, to take over as chief executive officer next year when Heinrich von Pierer steps down after 12 years.
Kleinfeld, 46, will take over on Jan. 27 and von Pierer, 63, will become chairman of the supervisory board, Munich-based Siemens said. Von Pierer's contract, which was scheduled to expire at the end of September, will be extended until that time, and Kleinfeld, who now runs Siemens's telecommunications units, will become deputy chairman of the management board Aug. 1.
``When you look at the career history of both guys, von Pierer is more on the managing side and politics,'' said Thorsten Winkelmann, a Frankfurt-based fund manager who counts Siemens shares among the $1.5 billion he helps manage at Deutscher Investment Trust. ``Kleinfeld comes more from a technology and business administration background.''
Von Pierer during his time as CEO has led the purchase of Westinghouse Power Generation and other businesses that later contributed to doubling revenue at Siemens. Kleinfeld takes over a company with 417,000 people worldwide, 13 billion euros ($16 billion) in cash and businesses ranging from conveyor belts to phones, medical equipment, dishwashers and power plants.
Siemens shares declined 5 cents, or 0.1 percent, to 56.82 euros in Frankfurt. The stock has gained 24 percent in the past 12 months, valuing the company at about 51 billion euros.
Turnaround
Kleinfeld, who runs marathons and sits on the advisory board of the New York Metropolitan Opera, will face the task of returning Siemens to sales growth after almost two years of declining revenue. While in the U.S., he oversaw a program called Siemens One that's aimed at increasing cooperation between the divisions and selling a wider range of products to customers.
``He stands for a continuous internationalization of the company.'' Andre Jaekel, an analyst at ABN Amro in London who rates the stock ``add,'' said in a telephone interview. ``He really made the turnaround in the U.S.''
In his two years running Siemens in the U.S., Kleinfeld cut to five from 24 the number of divisions that are unprofitable. The U.S. unit, which no longer discloses separate earnings, had a 2002 operating profit of 823 million euros after a loss of 604 million euros in 2001. Kleinfeld was named head of Siemens's information and communications group last November and took over in January.
Von Pierer has also focused on the U.S. market and in 1998 bought the Westinghouse turbine business from CBS Corp. followed by purchases of Dallas-based telecommunications company Efficient Networks Inc. and then most of water-treatment company U.S. Filter Corp. earlier this year. In addition, he has cut about 35,000 jobs in the past three years and spun off units.
Stepping Down
``I'm very glad we've been able to come up with an excellent successor,'' von Pierer said at a conference organized by Dresdner Bank AG in Berlin today. ``I guess I'll have to live with the idea of becoming more and more of a lame duck in the next six months.''
In charge since October 1992 and the second-longest serving chief executive on Germany's benchmark DAX Index, von Pierer almost tripled Siemens's stock in his time at the helm. He is the first non-technician to head Siemens, which was founded in Berlin in 1847 by Werner von Siemens.
Von Pierer is the latest CEO to step down at one of Germany's 30 largest companies. In March, the head of Siemens's former semiconductor unit Infineon Technologies AG, Ulrich Schumacher, left after losing backing from the supervisory board. Allianz AG, Europe's largest insurer by premiums, appointed a new CEO in April 2003, and a new chief executive took charge at Munich Re, the world's largest reinsurer, in January.
Transition
``Siemens is moving from a cost-cutting phase to a phase where it has to focus on maximizing profit, and it's good that this transition is mirrored with a change in senior management,'' said Roland Pitz, an analyst at Munich-based HVB Group, who rates Siemens shares ``overweight.''
Siemens today also said it's merging the fixed-line and mobile-phone telecommunications business and named a new head to the unit. Lothar Pauly, who is a board member at the mobile-phone unit, will head the combined units starting in January.
Rudi Lamprecht, who now heads the mobile division, and current networks head Thomas Ganswindt, who both had been touted as possible successors to von Pierer, will be named to the management board and assume new tasks, Siemens said.
The divisions Kleinfeld oversaw since his return from the U.S. account for about a third of total revenue, and the mobile and network units bore the brunt of job cuts during the past years as customers such as Deutsche Telekom AG cut spending. Siemens is the world's fourth-largest mobile-phone company and has about a quarter of the global market for faster wireless networks.
Spinoffs
Von Pierer, whose salary isn't disclosed, pulled out of about 50 businesses that employed 60,000 people in the past five years by selling units or making them publicly traded companies, such as Infineon, Europe's second-biggest chipmaker, and Epcos AG.
He also recently helped negotiate longer working hours for more than 4,000 employees at two German factories assembling phones to prevent cutting almost half the staff there and shifting some production to Hungary, where wages are 30 percent lower than in Germany. Siemens is Germany's largest corporate employer.
``Von Pierer leaves a very big hole inside and outside the company,'' said Henning Gebhardt, who holds Siemens shares among the $130 billion he helps manage at Frankfurt-based DWS Investment GmbH. Filling the position is ``not going to be easy because of the big profile that von Pierer has.''
Shareholders will vote on the election of von Pierer as the supervisory board chairman in January. Current Chairman Karl- Hermann Baumann will have to step down because company rules prohibit the position from being held by anyone older than 70.
Before joining Siemens in 1987, Kleinfeld was a product manager for Ciba-Geigy AG's pharmaceutical unit in Basel. He holds a Ph.D in strategic management from the University of Wuerzburg in Germany and sits on the management boards of U.S. companies including Turner Corp., the country's largest builder, and Alcoa Inc., the world's largest aluminum maker.
To contact the reporter on this story:
Benedikt Kammel in Berlin at bkammel@bloomberg.net.
To contact the editors responsible for this story:
Lars Klemming at lklemming@bloomberg.net or
Zimri Smith at zsmith@bloomberg.net.
Last Updated: July 7, 2004 13:57 EDT |
