Global Corruption
January 25, 2007
Chief executive Klaus Kleinfeld and supervisory board chief Heinrich von Pierer sought to placate shareholders over the collapse of Siemens' former mobile phones division and allegations of widespread bribery and embezzlement.
Von Pierer, who had been CEO during the period when the events were alleged to have taken place, admitted that the "essential anti-corruption measures," which the company introduced during his term, were not successful.
"I find it personally extremely disturbing that these efforts were not sufficiently successful," Pierer said.
With regard to the mobile phones business, which Siemens sold to Taiwan-based BenQ and which has subsequently collapsed, von Pierer insisted that the German company had done everything that could be expected for the activities.
The role of Siemens in the collapse of BenQ Mobile has been criticised, with critics saying the German company did not do enough to save the business.
Unlawful practice
Referring to the bribery scandal that has rocked the German engineering and electronics giant, von Pierer's successor, Klaus Kleinfeld, told around 9,000 shareholders that he was dismayed when he found out that a group of former and present employees had acted unlawfully.
"When I first heard of it, I was speechless," Kleinfeld said.
At the heart of the bribery allegations are questionable payments totaling about 418 million euros ($543 million), which are at present the subject of investigation launched by the Munich-based Siemens.
"We are doing everything we can to get to the bottom of this incident," Kleinfeld said. "There is no place for dubious business practices in our company."
Claims about bribery at the company triggered police raids in November on company office and the homes of several former and present employees.
On Wednesday, the EU Commission in Brussels had slapped a 418-million-euro fine on Siemens and its Austrian subsidiary for alleged price-fixing by its power generation division. Siemens is appealing against the fine, but must nevertheless pay it initially.
First-quarter results affected
Siemens' annual shareholders meeting on Thursday coincided with the publication of the group's first-quarter results, which showed its bottom-line profits hit by the European Commission fine.
Siemens, which runs its business from October to September, said in a statement that its net profit amounted to 788 million euros in the three months to December, down 16 percent from the year-earlier period.
Analysts had been penciling in net profit of around 973 million euros for the three-month period, but those forecasts did not take into account a one-off charge of 418 million euros booked at the last minute.
A strong start, nonetheless
Underlying earnings improved in the October-December period, however, with operating profit jumping by 51 percent to 1.631 billion euros, boosted by the strong performances of the medical technology and automation divisions.
First-quarter sales were up six percent at 19.068 billion euros and incoming orders rose by four percent to 24.582 billion euros.
"In terms of our underlying performance, the first quarter got the fiscal year off to a strong start," Kleinfeld said.
"While it is disappointing to see our net income growth reversed by an impact from events in the past, we are moving on with our operations tremendously improved year-over-year," he said.
Looking ahead
Overnight, Siemens announced that it had agreed to buy US software maker UGS for 3.5 billion dollars including debt.
In addition, Siemens would float its automotive supply business, Siemens VDO Automotive (SV), on the stock exchange, with the parent company to hold on to a majority stake.
"This move will give SV the necessary financial resources and greater entrepreneurial flexibility for ensuring further sustainable and profitable growth," the company said in a statement.
Looking ahead, the group predicted that all divisions would attain the profitability targets they had set themselves for the second quarter, after some of the divisions failed to meet those targets in the first quarter.