Siemens AG announced plans to eliminate an additional 4,700 jobs at its Osram lighting unit after it injected 699 million euros (US$908 million) in capital to the subsidiary it is preparing to spin off next year.
The job cuts, primarily outside Germany, come on top of 1,900 positions that Osram already reduced in fiscal year 2012 and will help reap 1 billion euros (US$1.3 billion) in cost savings as the market for traditional light bulbs shrinks, the company said on Friday in a statement.
In total, the job losses at Osram will amount to about 7,300 positions. The measures will cost a “mid-three digit million figure” through 2014, with the savings realized in full a year later.
Siemens said this week that it would spin off Osram next year and retain about a fifth of the company, after realizing that investments to keep pace in the lighting market would be too great for the engineering company to shoulder. Siemens trails Royal Philips Electronics NV in the market for lighting, which is tilting toward LED technology based on semiconductors.
“Personnel increases in the future fields will only partially compensate for the change in the traditional businesses,” Osram chief executive officer Wolfgang Dehen said in the release. Osram had about 39,000 employees as of Sept. 30.
The majority of roles will be lost by selling factories abroad, mainly smaller plants or facilities making products that have reached the end of their life cycle, Osram said.
In Germany, three sites will be affected, including in Berlin and Munich, where Siemens is based. Of the planned savings of 1 billion euros, about 25 percent will be staff related, while the majority will come from lower purchasing costs and productivity gains, Osram spokesman Constantin Birnstiel said.
Siemens estimates the total lighting market will grow by about 5 percent each year to 2016, with LED market volume to quadruple by then to 37 billion euros, according to figures compiled by McKinsey & Co. The market for traditional lighting products will fall by 15 percent in that time, the data show.
Both Siemens and Philips have sought to push into the LED market, with Siemens opening a plant in China that will eventually employ 1,700 people.
Philips, based in Amsterdam, has also deepened job cuts at lighting facilities, and the company announced reductions at a factory in Belgium this month.