Siemens Energy will reduce production and employment during a difficult wind unit turnaround

Siemens Energy will reduce production and employment during a difficult wind unit turnaround

The onshore division is the focus of the reduction, since this is where Gamesa has had the greatest difficulty and where the industry is losing money due to excessive expenses.

Siemens Energy's Gamesa business will reduce production and employment in order to make a profit.

With regard to fixing its struggling wind turbine business, Siemens Energy AG is making progress.

After four years of deficits, the German manufacturer plans to reduce production and employment at its Gamesa subsidiary, with the ultimate goal of double-digit returns, Siemens Energy said on Wednesday. According to the plans, the firm would pull back and concentrate mostly on the US and European markets.

The onshore division is the focus of the reduction, since this is where Gamesa has had the greatest difficulty and where the industry is losing money due to excessive expenses. Substantial technical issues with a new generation of Gamesa turbines finally posed a danger to the company's lucrative gas and grid-making businesses, which made the former Siemens AG subsidiary go to the government for support in order to remain competitive for big contracts.

With Gamesa employing over 26,000 people, the firm did not disclose the exact amount of possible job layoffs.

Additionally, Gamesa will replace its CEO, marking the fourth such change since 2017. Jochen Eickholt, who has led Siemens Energy's Spanish wind power sector since March 2022, will be replaced by Vinod Philip, 50, who already oversees the company's IT, buying, and innovation unit. The 62-year-old Eickholt will retire in July.

Additionally, Siemens Energy released fiscal second-quarter profits that above analyst projections and increased the company's forecast. Pretax free cash flow is expected to reach €1 billion ($1.1 billion) this fiscal year, up from a negative €1 billion last year, with similar revenue growth of up to 12%, up from up to 7%, according to the business.

Chief Executive Officer Christian Bruch said in a statement that there is "continually strong demand for technology to power the energy transition." "Our primary focus remains the turnaround of our wind business."

Strong performance in other divisions, such gas and grid technology, has been overshadowed for years by problems with malfunctioning wind turbines at Siemens Energy's Gamesa business. The problems led to billion-euro losses in the previous fiscal year and ultimately resulted in an agreement worth €15 billion to strengthen the German government's finances via asset sales.

Worse, the mess has occurred at a time when raw material prices are skyrocketing and supply chains are being disrupted elsewhere in the sector. Following price hikes, rival Vestas Wind Systems A/S said last week that turbine sales fell in the first three months of the year.

According to Siemens Energy, fixing the issues would take years, and it won't break even until 2026. Bruch hinted in February that should Siemens Energy fail to hit its midterm profit projections, it may sell off its ailing onshore wind division.