Siemens Energy is reportedly considering the closure of Siemens Gamesa factories and sales offices as part of a strategic review aimed at reducing losses within its wind turbine business. The German power equipment supplier has faced significant quality issues within its onshore wind turbine division, as well as potential losses from offshore contracts, causing its shares to plummet by over 50% since June.
To address these challenges, Siemens Energy plans to outsource the production of key components, such as blades, in order to improve margins and ensure long-term relief for Siemens Gamesa. This restructuring may result in further layoffs for the company.
Siemens Energy CEO Christian Bruch is under pressure to present a convincing turnaround plan for Siemens Gamesa, as problems within the division became apparent shortly after full ownership was assumed. In August, Bruch stated that profitability and stability would be prioritized over growth.
Further details regarding the restructuring plan are expected to be revealed in November, during Siemens Energy’s annual results release and capital markets day. It is important to note that no final decisions have been made, and the restructuring program may still undergo changes.
Siemens Energy has already incurred charges of €2.2 billion ($2.3 billion) related to the quality issues, which include defects in rotor blades and faulty gears in newer onshore wind turbines. Siemens Gamesa, the world’s largest manufacturer of offshore wind turbines, operates 79 sites globally, including sales and service offices, R&D centers, and 15 factories for blade and nacelle production.
Some of these sites may be closed or temporarily put on hold as Siemens Gamesa aims to eliminate production of parts that can be manufactured more cost-effectively by suppliers.
The challenges faced by Siemens Gamesa highlight the consequences of short production cycles in the industry, compromising quality. While Siemens Energy’s issues have garnered criticism from anchor investor Siemens AG, management changes or activist funds have yet to be implemented.
Sources suggest that changing leadership may not necessarily resolve the problems, and selling Siemens Gamesa’s problematic onshore division is viewed as a significant challenge.