Siemens Clarifies Plan for Spin-Off of Osram, Reorganization Includes 4,700 Job Cuts

Siemens AG, Munich, Germany, clarified plans for a spin-off of its Osram lighting business in preparation for an independent listing on public exchanges. The company also plans to reduce its Osram workforce by 4,700 workers, most through sales of production plants and the closing of smaller plants with lower sales and facilities producing lighting products nearing the end of their product life cycles. At the same time, Osram will invest in staff increases in markets and product lines that have a brighter future. Osram now has about 39,000 employees worldwide and generated €5.4 billion in sales in its fiscal 2012 (ended Sept. 30).

This reorganization builds on a plan begun in Jan. 2012 that already has cut 1,900 jobs worldwide. The company announced the reorganization at the end of November with a release, saying it expects the changes to bring cumulative gross savings of €1 billion by 2015, measured against a cost for the changes in the range of “mid-three digit million” euros. The company further plans to restore itself to profitability through changes in its production, R&D, sales and administrative functions.

The changes will help prepare Osram to survive on its own after a planned spin-off of the company. Siemens announced to shareholders on Nov. 28 that at its annual meeting Jan. 23, 2013, it would propose spinning off 80.5% of the company’s value. Siemens will retain a 17% stake in the lighting giant, and the Siemens Pension Trust will continue to hold a 2.5% stake. Siemens shareholders would receive one Osram share for every 10 shares of Siemens stock. Implementation of the plan will require favorable votes representing at least three quarters of Siemens shares.

Among the areas where Osram is expanding are halogen lighting. The company started up a new halogen production line at its Eichstatt location in Germany and has a second line already under construction. The company also is turning its Augsburg, Germany, site into a center of excellence for manufacturing processes to make LED-based products or expand fluorescent lamp production. Osram also will invest “low three-digit million euro” over the coming years in its Jiangsu, China, production facility to make products for the Chinese market and the broader Asian region.

Osram expects Asia to account for about half of general lighting demand globally in the next five years. The release also cited a McKinsey report predicting 5% growth in the overall lighting market from 2011-2016, with LED lighting growing to €37 billion by that time from €9 billion in 2011 and traditional lighting products shrinking by 15%.