Siemens AG is considering strategic options including a potential sale of its struggling business that makes large gas turbines for power plants, according to people familiar with the matter.
The German engineering company is looking at all possibilities, such as a combination with a rival, for what was once a flagship operation within the power and gas division, said the people, who asked not to be identified because the discussions aren’t public. They cautioned that no final decision has been made and the company could end up weathering a downturn and keeping the business.
A spokesperson for Siemens said the company doesn’t comment on market speculation. It also doesn’t break out earnings for the turbine activity, which is part of the power and gas unit that accounted for 15% of Siemens’s 20.1 billion euros (US$23.6 billion) in total sales last quarter.
Siemens shares rose 1.3% to 117.36 euros at 1:19 p.m. in Frankfurt, giving a market value of 99.9 billion euros.
The deliberations come after Siemens unveiled a plan in November to cut 6,900 jobs at the power and gas division and close some factories. The unit has suffered from a collapse in turbine orders as the global energy industry shifts to renewable sources like wind, solar and hydropower. Finding a buyer may not be easy as competitors face similar issues.
General Electric Co., a market leader alongside Siemens, is mired in a deep slump largely because of a deterioration in its own power-generation business. The Boston-based company recently announced 12,000 layoffs in the unit and said the market for gas turbines will remain “soft” for several years. GE is weighing bigger changes as well, including a possible breakup that could separate the power business into a standalone entity.
Siemens Chief Executive Officer Joe Kaeser has previously said in interviews that the turbine activity isn’t part of the company’s future “industrial core.” The executive has merged or spun off other units deemed to be on the periphery, including combining the train business with French competitor Alstom SA, and hiving off the health-care division in an initial public offering.
Siemens Chief Financial Officer Ralf Thomas told investors in March that he expects the market for large gas turbines in 2018 to fall to 100 units, 10% less than the company had previously expected, according to analyst notes about the event.
By Oliver Sachgau and Eyk Henning
