Siemens Energy AG will cut roughly a sixth of workers from its gas and power division in the latest sign that the worldwide shift to green energy is upending the fossil-fuel businesses.
The company will eliminate 7,800 jobs by the end of its 2025 financial year, including about 3,000 positions in Germany and 1,700 in the U.S. Roughly three-quarters of the reductions will be of management and sales roles.
“The energy market is significantly changing, which offers us opportunities but at the same time presents us with great challenges,” Chief Executive Officer Christian Bruch said Tuesday.
Siemens Energy’s gas and power division employs about 46,000 workers and builds and maintains turbines used in gas and coal-fired power stations — plants that are in the crosshairs of governments looking to make good on their climate targets. Low-cost renewable energy also has undermined the economics of burning coal and gas, leading to lower run times for some plants and the shuttering of others.
Siemens Energy shares slipped 0.3% to 31.16 euros shortly after the start of regular trading in Frankfurt. The stock has climbed 47% since the late-September listing following its spinoff from Siemens AG.
Industrial rival General Electric Co. carried out a similar mass job cut starting in late 2017. The company announced plans then to eliminated 12,000 positions — almost one-fifth of its power division’s global workforce — following its $10 billion deal to buy Alstom SA’s energy business two years earlier.
Economists expect the addition of renewable energy job to offset losses linked to fossil-fuel business, although estimates vary. One study by the Institute for Economic Structures Research in Osnabrueck, Germany, estimated that around 120,000 jobs that otherwise wouldn’t exist were created by Germany’s green transition.
Still, certain regions are expected to be hit hard by the shift away from coal and gas. In 2019, Germany’s right-wing populist AfD party made gains in Lusatia, a coal-mining region that will be impacted by the country’s plan to quit coal-fired power by 2038.
Siemens Energy’s downsizing is in addition to the 300 million-euro ($362 million) cost savings target that it already has announced. Redundancies will be negotiated with unions in jurisdictions where laws require the company to do so. One-off costs related to the reductions will amount to a mid- to high-triple-digit million-euro amount.
The move comes as Siemens Energy targets an adjusted earnings before interest, taxes and amortization margin of between 6.5% to 8% by 2023, up from negative 0.1% in the financial year that ended in September./Bloomberg