Siemens Takes the Rap

Chancellor Angela Merkel hasn't so far pointed any fingers, but she did single out Siemens as being responsible for the 3,000 employees who will be out of a job when BenQ Mobile closes shop in Germany. Merkel had telephoned with Siemens CEO Klaus Kleinfeld on Sunday.

"I have made clear to Siemens that this traditional firm has a special responsibility," Merkel told Bild-Zeitung daily. "In view of this overall responsibility, I would welcome it if Siemens does everything (it can) to give as many employees as possible a future perspective."

Siemens said it would set up a 35-million-euro ($44 million) fund to help out employees at BenQ Mobile who will likely be jobless come January 1. Siemens' managing board also decided to cancel a much-criticized 30 percent pay hike that would have put 5 million more euros into the top executives' pockets. The money would instead go into the fund, which would be spent on re-education and further training as well as being paid out in cash to Siemens' former staff.

"If BenQ leaves employees standing in the rain, we want to actively help --- and quickly," Kleinfeld told Bild, in an effort to save face. He said the pay hikes for top managers had been warranted but that the situation had changed. "…We want give the people a show of solidarity," he added.

Siemens responsible?

Siemens had paid BenQ to take over its struggling cell phone division last year, agreeing to pump around 700 million euros into the company.

A Siemens spokesman said part of the reason the company sealed the deal with BenQ was that the Asian firm had explicitly shown interest in keeping German locations open. Other interested firms would have closed the Munich headquarters and the plants in Kamp-Linfort and Bocholt in North Rhine-Westphalia, the spokesman said.

He stressed that Siemens had not gotten rid of the ailing mobile division just to abscond from responsibility for it. "From today's point of view, it would have cost us 250-300 million euros to close the German locations." Handing the division to BenQ had instead cost Siemens 413 million euros, he said.

BenQ Mobile declared insolvency on Friday, after the Taiwanese parent company cut off further investment in the German subsidiary.

Ready to bail out?

A report on Monday suggested that BenQ had consciously planned the mobile division's demise. Two weeks ago, negotiators for BenQ had requested that Siemens transfer at least 50 million euros in outstanding payments directly to the firm's Taipeh headquarters rather than to the Siemens-BenQ subsidiary in Germany as originally intended, Süddeutsche Zeitung daily wrote. The negotiators claimed that the payment was necessary due to BenQ's overall financial weaknesses.

Siemens apparently agreed to advance the payment but not to transfer it to Taiwan. Subsequently, BenQ lost interest in the payment, the paper wrote.

But as German politicians from all parties lambasted Siemens for the expected loss of 3,000 jobs, the company didn't necessarily deserve all the blame. There has been widespread agreement that Siemens ran its mobile division into the ground through bad management. The company failed to pick up on market trends, and although Siemens Mobile was the fifth-biggest hand-set manufacturer in the world in 2005, it turned in one quarterly loss after another by the time CEO Kleinfeld called it quits.

Only 100 days into his new position as chief executive, Kleinfeld announced in April last year that the search had begun for a way to improve the mobile unit's fortunes, which he said did not involve selling or scrapping it. Less than six months later, BenQ became the division's sole owner.

Three months to go

However, BenQ took charge of the mobile unit, and as the Financial Times Deutschland pointed out: "Bought is bought." BenQ's real mistake was allowing Siemens to palm off the division on it, the paper wrote.

But by laying the blame on former owner Siemens, politicians were giving employees false hopes, since neither BenQ nor Siemens could rescue the cell phone company, it added.

Insolvency administrator Martin Prager said over the weekend production at BenQ Mobile would continue until at least the end of the year. But if the company was not profitable by then, business could not be continued, he added.