Peter Löscher was the first non-Siemens employee in 160 years recruited to lead the German industrial giant in May of 2007. And for good reason.
The company was sorting out a massive bribery scandal that led to the departure of several executives as Siemens, later, agreed to pay $1.3 billion in fines to the U.S. and German governments, the largest bribery fines in history.
Mr. Löscher, 54, is an Austrian who understands Siemens’ European culture and had experience in healthcare, a key business for Siemens. But he is also an outsider who speaks five languages and has worked around the globe for companies ranging from Merck & Co. Inc., Japan’s Aventis Pharma Ltd. and Siemen’s chief rival General Electric Co.
Mr. Löscher aimed to resolve the scandal and move Siemens further into growth markets such as India, China and the United States. He now aims to expand its energy, healthcare and lighting businesses and has boosted profits in the company’s EUR 12 billion financial services division as well.
Siemen’s net income climbed 63% to Eur 4.07 billion, although revenue of Eur 75.98 billion was flat with the previous year. The company boosted its shareholder dividend 69% to Eur 2.70 per share for 2011 as the company expects revenues to pick up and income from continuing operations to expand by up to 35%.
Mr. Löscher shared his thoughts and strategy in a recent interview in Washington D.C.
Q: How important is the U.S. market for Siemens?
A: It’s 20% of our global sales. It’s more than 60,000 employees. In the last 10 years, we have spent $25 billion on investments just in the U.S.... It’s important as a hub because 20% of our U.S. business, we are exporting globally. We see it as a major leader of innovation.... We are very bullish about the U.S., despite the factor of the current economic environment.
Q: The Obama administration’s goals seems to align with the types of businesses you guys are in?
A: We made the assessment this continues to be a very important market. Gas turbines continue to be a great growth market for us so we put it in (expanded a plant near Charlotte). Similarly, we have massively expanded the footprint of our renewable energy division, particularly wind. What the Obama administration is putting forward as being a leader in green industry is something we absolutely believe in.
Q: On the global recovery, in the next 2-5 years, what kinds of things are we seeing in the U.S. that make you want to invest here?
A: America will continue to upgrade its infrastructure. It will be done in a sustainable manner. You talk about high speed trains and rail projects. You talk about smart grid projects. You talk about energy infrastructure programs. You talk about energy efficiency. In many, many regards we strongly believe the alignment between the Siemens portfolio and the needs of America is a great match.
Q: You are trying to use financial services to keep growth coming along. How are you doing that?
A: The Siemens financing arm and financial services is a very clear focus behind helping to accelerate growth for our operating units.
Q: Why are you growing your finance business now?
A: The overall environment for this offering is becoming more attractive. We used to live in a world, before the crisis, where money was not a limiting factor. Now, all of a sudden, money is a limiting factor. The attractiveness of this offering is, in the current environment, very important.
Q: You’re an alumnus of another company, GE, which got in trouble by being so large in finance. So how do you assess the risks of how big to get into the finance part of the industrial world?
A: We have no intention whatsoever to move into commercial financing. We have no intention whatsoever to move into consumer financing. What we are focusing on is really our own project financing. Therefore, the risk level is absolutely aligned with the project opportunities. We are investing in projects that we actually believe are great projects for us. It’s always around our own product line such as in healthcare financing.
Q: Wind orders in the U.S. are down. What do you expect in wind? More consolidation? And where will Siemens be in that picture?
A: We want to be among the top industry players in wind. The industry will certainly consolidate.
Q: In China, are you selling a lot of turbines there? Do you have partnerships with any wind turbines companies in China?
A: We are certainly seeing China as a market but the current growth is actually outside of China for us.
Q: Is it still a delicate dance for you in China on sharing intellectual property there?
A: No. No. China has massively improved. China has a very clear intellectual property strategy. Is it perfect? Nobody’s perfect. But there is a clear intention by the government to improve this. This is one of the reasons research and development centers are flocking into China.
Q: What’s your read on competition right now with key rivals like GE?
A: We have repositioned the company in terms of taking costs out. The relative competitive position of Siemens during the crisis is that we have managed very well and we are extremely happy about it. But I don’t want to talk about other companies. Other CEO’s have to talk about their company.
Q: When you came to Siemens, they were getting past this scandal and FCPA issue. What are you doing from a management level to change the culture?
A: My number one priority was to resolve this crisis for Siemens as quickly as possible. We settled everything at the end of 2008. This is looong past us.... We weren’t focused on just settling the crisis. We were focused on using this as a defining moment for the company.
Q: Any interesting new management techniques you have discovered?
A: It’s very simple. Siemens stands for clean business always and everywhere. This is a clear goal post...We put other processes in place. We made sure the right customers are the focus of the Siemens organization. We have demonstrated Siemens was never as profitable or growing as fast as we do now.