Siemens Energy’s turbine business faces headwinds

Frankfurt — Siemens Energy is considering shutting down Siemens Gamesa factories and sales offices as part of a review aimed at reducing losses at the wind turbine business, three people familiar with the matter said.

The German power equipment supplier is struggling with far-reaching quality issues at its onshore wind turbine division and potentially loss-making offshore contracts, which have caused its shares to more than halve since June.

The measures, which are likely to cause fresh layoffs, are aimed at providing long-term relief for Siemens Gamesa by outsourcing production of some key components, such as blades, to raise margins, the people said.

Siemens Energy CEO Christian Bruch is under pressure to present a convincing turnaround plan for Siemens Gamesa after detailing problems just a few months after assuming full ownership of the division.

Bruch said in August that Siemens Gamesa would prioritise profitability and stability over growth, suggesting a brimming order book needed to lead to healthy profits.

Details of the division’s restructuring could be unveiled in November, when Siemens Energy is scheduled to release annual results and hold a capital markets day, the people said.

No final decisions have been taken and details of the restructuring programme could still change, they said.

A spokesperson referred to comments from Bruch in August, who said the most important thing was to stabilise Siemens Gamesa and that Siemens Energy was looking at all options.

So far, Siemens Energy has booked €2.2bn in charges related to the problems, which include wrinkles in rotor blades and faulty gears in newer onshore wind turbines.

Globally, Siemens Gamesa, the world’s largest maker of offshore wind turbines, operates 79 sites, including sales and service offices, R&D centres and 15 factories to produce blades and nacelles.

Some of those could be closed or shuttered as Siemens Gamesa aims to rid itself of production of parts its suppliers can make more cheaply, the people said.

Siemens Gamesa’s troubles have put the spotlight on a sector suffering the consequences of super-short production cycles, which have come at the expense of quality.

While drawing the ire of anchor investor Siemens, Siemens Energy’s issues have not resulted in management changes or attracted activist funds.

According to two separate sources familiar with the matter, removing the leadership would not necessarily fix the problems and a sale of Siemens Gamesa’s problematic onshore division is seen as a major challenge.

Reuters