The EconomistSeptember 21st 2019 Business 772 TheWeWorkfiascocomesasMrSon’s
$108bnVisionFund2 wasabouttostart.In
Augusthesaidhewouldbeginspendingits
cash withinamonth ortwo.Memoran-
dumsofunderstandinghavebeeninked
withinvestors. Worries abouttech ipos
andaneconomicslumpmaymakeit hard-
ertoclose.TheSaudifundandAbuDhabi’s
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torintheoriginalvf, arereportedlycon-
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mayneeda face-savingwaytoreducethe
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thefirstdotcombubble,isnostrangerto
theupsanddownsofventureinvesting.
WeWork’sMrNeumannhasadmittedto
feeling“humbled”bythedelayedipo. His
cheerleader-in-chiefisprobablynot. 7J
oe kaeser cuts an unusual figure among
the taciturn bosses of Deutschland ag.
The wiry 62-year-old is bursting with ener-
gy. He unabashedly tweets (in both English
and German) about his concern over the
rise of the hard-right in Germany—and,
more atypically still, considers such pro-
nouncements to be part of his job as a cap-
tain of German industry.
Mr Kaeser’s boldness has made him
friends, but also bitter enemies, who ac-
cuse him of calculated pr, hypocrisy, dou-
ble standards and far worse. He was widely
criticised for meeting Russia’s president,
Vladimir Putin, shortly after his annex-
ation of Crimea and for cosying up to the
governments of Saudi Arabia, China and
Iran when big contracts are at stake. “The
voice of morality is flexible,” was the head-
line of a recent article about Mr Kaeser in
the Neue Züricher Zeitung. Mr Kaeser ad-
mits that moral values and business inter-
ests can clash. “It is a thin line to walk,” he
says. But “values don’t always create jobs.”
These days Mr Kaeser may be making
headlines for his worldview. But his six-
year effort to spruce up one of Germany’s
industrial giants deserves equal—if not
greater—attention. True to his tempera-
ment, he has gone about this mammoth
task in a thrusting manner. Success, he be-
lieves, is near. Is it?
The son of a mechanic from Lower Ba-
varia, who betrays the region’s lilt in both
English and German, has worked at Sie-
mens for 40 years. In 2013, when he was
promoted from finance chief to chief exec-
utive, only two of nine divisions of the
group, which makes everything from soft-
ware and body scanners to trains and gas
turbines, were doing well. A good chunk of
sales was generated by businesses that
made no profit at all. Mr Kaeser slimmed
the group’s bloated bureaucracy, centralis-inghumanresources and other functions
and ordered division bosses to focus on de-
veloping, building and selling their wares.
By 2017 most of the heavy lifting appeared
to be done. Siemens’s share price recovered
to highs last seen in 2007. The supervisory
board prematurely extended Mr Kaeser’s
tenure to 2021.
Some felt that at this point Siemens de-
served a pause from the restructuring
drive. Instead, Mr Kaeser accelerated it. He
spun off the group’s remaining stake in Os-
ram, a maker of light bulbs, sold its kitchen
and washing-machine business to Bosch,
another German engineering giant, and
flogged its hearing-aids unit toeqt, a Scan-
dinavian private-equity firm. He merged
Siemens’s wind-turbine arm with Spain’s
Gamesa and listed Healthineers, its medi-cal-technology business, on the Frankfurt
stock exchange. Traditional conglomerates
do not have a future because, he says, their
inherent lack of focus drives mediocrity.
This furious diet has not had entirely
the desired effect. Since the start of 2017
Siemens has underperformed Germany’s
stockmarket and counterparts like Alstom
of France and Philips of the Netherlands. In
February the European Union blocked the
proposed merger of the rail business with
Alstom’s, on competition grounds. Mr
Kaeser is looking at alternatives, including
a public listing for the unit. On August 1st
Siemens missed analysts’ earnings fore-
casts in all its industrial divisions bar rail.
With characteristic punchiness, Mr
Kaeser blamed investor angst on geopoli-
tics and macroeconomics. Fresh from a
trip to China with Chancellor Angela Mer-
kel, he is himself nervous about trade ten-
sions between China and America. “A de-
coupling of economic systems and
standards driven by a political agenda
would be a nightmare,” he says, predicting
it would set the world back by decades. Sie-
mens has 33,000 employees in China, its
second-largest international market after
America, representing a tenth of sales.
Some of the company’s recent weakness
may indeed be down to the global slow-
down. But some surely reflects the difficul-
ty of turning around a sprawling 172-year-
old giant. Industry-watchers estimate that
its shares are still trading at a discount of
up to 30% compared with its sum-of-parts
value. Mr Kaeser expects vindication next
September, when he plans to list the ailing
gas-and-power unit. The business, which
employs 80,000 people and makes €30bn a
year in revenue from dirty energy indus-
tries, will be tarted up by adding Siemens’s
59% stake in Gamesa. Hiving it off will re-
move a big drag on the parent’s perfor-
mance, suggest analysts at Deutsche Bank.
“The endgame is to transform Siemens
into a slimmer world leader in industrial-
automation software and smart infrastruc-
ture,” says Ben Uglow of Morgan Stanley, an
investment bank. Margins on the digital
and automation arms are 17-23%, well
above the 10% for the rest of the group. If Mr
Kaeser has his way, these will form the core
of the future Siemens.
On September 18th the group’s supervi-
sory board proposed that Michael Sen, who
sits on the management board, lead the
soon-to-be-sold energy business. It also
appointed Roland Busch, the operations
and technology chief, as deputy ceo—and
Mr Kaeser’s heir-apparent. As the man
overseeing the digital and automation
businesses, Mr Busch has the experience to
steer a streamlined Siemens into the next
era. Mr Kaeser had a good run until 2017,
then a so-so one. It may be time to pass the
baton. Perhaps he can try his hand—and
his Twitter-adept thumbs—at politics. 7BERLIN
Nobody said reforming Europe’s biggest conglomerate was going to be easySiemensKaeser’s reign
In the limelight