von Pierer, Heinrich 1941–
Heinrich von Pierer
President, chief executive officer, and chairman, Siemens
Born: January 26, 1941, in Erlangen, Germany.
Education: University of Erlangen-Nuremberg, Germany, JD, 1968; diploma in economics, 1969.
Career: University of Erlangen-Nuremberg, 1965–1969, academic assistant and later assistant professor; Siemens: 1969–1977, staff attorney in Corporate Finance Department; 1977–1987, sales and marketing positions, Kraftwerk Union Group; 1988–1989, head of business administration, Power Generation Group; 1989–1991, president of Power Generation Group; 1991–1992, deputy chairman of Managing Board; 1992–, president, chief executive officer, and chairman.
Awards: Corporate Leadership Award, Siemens Information and Communications Networks, 2001; Global Leadership Award, American Institute for Contemporary German Studies, 2002; Award for Understanding and Tolerance, Jewish Museum Berlin, 2002.
Address: Siemens, Witelsbacherplatz 2, 80333, Munich, Germany; http://www.siemens.com.
■ In the years since Heinrich von Pierer took over as chief executive officer of Germany's Siemens in the fall of 1992, the giant electronics and electrical engineering company dramatically increased its sales and assets worldwide. Although von Pierer's relationship with the company's investors was occasionally a bit rocky, in the end he had the satisfaction of seeing his company outpace the competition on almost every front. Under von Pierer's direction, the company's net return on sales climbed from 2.4 percent the year after he took over as CEO to 4 percent in the first quarter of fiscal 2004 (October 1, 2003–December 31, 2003).
As of mid-2004 von Pierer's future with Siemens was in doubt. Although his contract was scheduled to expire in September
2004, he was expected to accept a two-year extension that would keep him in control until the fall of 2006. Investors, many of whom had called for his resignation only a few years earlier, now found the prospect of his departure more than a little daunting. Even if von Pierer stayed on until 2006, as seemed likely, speculation was rife about his eventual successor. According to a report by Jack Ewing in BusinessWeek, the leading candidates were Klaus Kleinfeld, Johannes Feldmayer, and Thomas Gaswindt. Both Kleinfeld and Feldmayer were members of Siemens's Corporate Executive Committee. Kleinfeld had distinguished himself by turning around the company's American operations as head of Siemens's U.S. division, while Gaswindt had won praise for his leadership of the company's fixed-line telecommunications equipment operations. Feldmayer was considered the least likely of the three to be tapped as von Pierer's successor, since his background was in the financial side of the company, which traditionally has chosen its top executives from among the ranks of its engineers.
CRITICIZED FOR MANAGEMENT STYLE
Von Pierer's management style frequently came under fire in the mid-1990s from investors who felt that he moved too slowly and cautiously in shaping the company into a sleek international competitor. In the end von Pierer was vindicated when his slow, deliberate approach to management led Siemens to significantly better performance than such competitors as the Dutch-based Philips Group and Swiss-Swedish ABB. Both Philips and ABB fared poorly during the worldwide economic recession of the early 2000s, while Siemens posted impressive earnings despite the global downturn. In fiscal 2003 Siemens posted net income of more than $2.9 billion on sales of roughly $86.5 billion, up from a profit of just under $2.6 billion on revenue of approximately $82.9 billion in fiscal 2002. Philips managed to eke out a profit of $961 million on sales of $36.5 billion in 2003, up from a net loss of more than $3.3 billion on $33.4 billion in revenue the previous year. ABB in 2003 earned $168 million on sales of $18.8 billion, unchanged from its 2002 net income on revenue of $18.3 billion.
Von Pierer was born on January 26, 1941, in Erlangen, Germany, into a family with a long military tradition. His father served as a colonel in the German army, and his grandfather had attained the rank of major general. Von Pierer, however, had his sights set on a career in either the law or business. He enrolled at the University of Erlangen–Nuremberg to study law and economics. He received his law degree in 1968 and a diploma in economics a year later. While still a student at the university, he worked as an academic assistant and later was promoted to an assistant professorship. After earning his diploma in economics in 1969, he went to work for Siemens in the legal division of the company's Corporate Finance Department.
After eight years of legal work, von Pierer moved to Siemens's Kraftwerk Union Group, where he began to learn more about the company's sales and marketing operations and, over the next decade, held a series of positions in various of the group's departments. Having learned more about the business side of the company's operations, he was tapped in 1988 to be head of business administration for Siemens's Power Generation Group. After only a year in that position he was promoted to president of the Power Generation Group and named to the corporation's Managing Board. In 1990 he joined the company's Corporate Executive Committee. He climbed higher on the ladder in 1991 when he was named deputy chairman of Siemens's Managing Board. In September 1992 von Pierer reached the top at Siemens when he was named president and chief executive officer and elevated to the chairmanship of the company's Managing Board.
SIEMENS, GERMANY UNDERWENT MAJOR CHANGES
Von Pierer's elevation to chief at Siemens came at a time of dramatic change for both the company and Germany. Just two years before he took over as CEO, Germany was reunified after more than four decades of separation. And at Siemens the corporate structure had been dramatically realigned in the final quarter of 1989. To better meet the competitive challenges of the changing global marketplace, the company's large business units had been broken into smaller entities. Following the corporate restructuring, Siemens had in 1990 created Siemens-Nixdorf Informationssysteme, the largest European company in the computer industry. It further enhanced its standing in the international information technology market with the acquisition of Britain's Plessey in 1991 and America's Rolm Corporation in 1992.
Under von Pierer, Siemens continued to expand into the international arena, albeit a little too slowly and tentatively to suit some of the company's investors. By the mid-1990s Siemens had made a massive investment in a new semiconductor manufacturing facility in the United Kingdom and also had begun to expand aggressively into China. Still the investors wanted more. They also were calling for von Pierer to get the company out of business lines that were dragging it down and hampering its competitiveness in the global marketplace. By early 1997 Siemens shares had dropped dramatically, weighed down by company predictions that sales, orders, and profits for fiscal 1997 would be essentially unchanged from the previous year. In an interview with David Brierly of the European, von Pierer expressed surprised at the market's interpretation of the company's fiscal 1997 projections. "It was apparently expected that every year we would see profits increase in line with the past two years," von Pierer said. "That is unrealistic. We have just raised our profits by 50 percent" (January 16, 1997).
In the fall of 1998 von Pierer announced a sweeping reorganization at Siemens. To streamline the company for the increasingly competitive high-tech marketplace, he said he would divest most of Siemens's components businesses and spin off its semiconductor unit. The move stripped the electronics giant of units that generated a total of $10.2 billion in sales and employed roughly 60,000 worldwide. The decision to get out of the semiconductor business was widely applauded, since the company's chips unit had suffered a loss of more than $700 million in the previous fiscal year, a dramatic reversal from a profit of $65.7 million a year earlier. Asked by Electronic Buyer News to assess the Siemens reorganization plan, Anita Farrell, an analyst with Merrill Lynch in London, observed: "It makes sense to try to rationalize the business. It's too big and too diverse" (November 9, 1998).
ACQUISITION CAMPAIGN IN THE U.S.
In the late 1990s von Pierer launched a large-scale acquisition campaign in the United States, where the company had not been well known previously. Between early 1997 and early 2002 Siemens spent roughly $9 billion to acquire U.S. properties. As a result of the acquisition foray, its U.S. unit became the company's single largest operations center. Even more important, the United States also became Siemens's largest market, accounting for nearly $19 billion in sales in fiscal 2001, up 23 percent from the previous year. This sharp jump occurred despite the start of an economic recession in the American market. Asked by Adam Aston, industrial management editor of BusinessWeek, how the company had done so well in a declining economy, von Pierer explained that many of Siemens's groups, including power generation, infrastructure, and medical solutions, served stable, noncyclical markets. "Other groups are more cyclical, such as our information and communications divisions" (February 4, 2002).
Of Siemens's many acquisitions in the United States, von Pierer cited the purchase of Westinghouse's non-nuclear power-generation operations as one of its most successful. The acquisition included Westinghouse's fuel-cell activities as well as its power-line and power-generation businesses. Von Pierer told Aston that after the acquisition Siemens had halted its own R&D on fuel cells and decided to focus future activities in this area on the Westinghouse design. He said that the company had also adapted Westinghouse's power-services businesses as a model for its operations elsewhere. He pointed out that it was a line of business in which Siemens had been unsuccessful in the past. "But I found that our Westinghouse friends had a lot of experience and enthusiasm for this business. So we transferred what we call the 'center of competence' for worldwide power services from Berlin to former Westinghouse managers in London."
Another major market for Siemens in the early 2000s was China, which by early 2002 had become the company's third-largest market after the United States and Germany. Von Pierer told Aston, "I'm especially pleased about China," which in fiscal 2001 accounted for roughly $3.5 billion of Siemens's total sales. He said that the company's strongest growth in China was being recorded by its three main infrastructure businesses—power transmission and distribution, transportation systems, and telecommunications. In the latter area, von Pierer said, Siemens ranked among the top three suppliers of cellular infrastructure in China.
FOCUSED ON COST-CUTTING
In fiscal 2003 von Pierer stepped up efforts to reduce costs at Siemens, which like most of its competitors was still feeling the lingering effects of the global economic downturn. The cost-cutting strategy paid off in the fourth quarter of fiscal 2003 when Siemens posted a net profit of $917 million, beating analysts' predictions of $780 million by almost 18 percent and up substantially from the same period a year earlier. Siemens also outperformed most of its major competitors. Making the company's performance all the more impressive was the fact that it had been accomplished on much weaker sales, which totaled only $23.9 billion, 7 percent lower than in the fourth quarter of fiscal 2002. The surprisingly strong performance was built largely on von Pierer's aggressive cost-cutting efforts, which involved the imposition of profit-margin targets on all of Siemens's divisions and the discontinuation of thousands of jobs. In announcing the company's results, according to the Birmingham (U.K.) Post, von Pierer exultantly announced, "There is no better company than Siemens. I have been having fun here for 34 years now" (November 14, 2003).
In early 2004, with the worldwide economic recession behind it, Siemens appeared ready to step up its acquisition pace once again. According to a report in Tech Europe, von Pierer told the Financial Times that the company was considering acquisitions similar to the recent purchase of the British medical firm Amersham by U.S.-based General Electric for $9.5 billion. The Siemens chief revealed that areas being considered for possible acquisitions were power generation, automation and controls, and medical equipment, all businesses that von Pierer believed had promising growth prospects. Reports circulated that the German company was looking in particular at acquisition targets that would strengthen its market position in Japan and Eastern Europe.
One strategic alliance that seemed almost a done deal for Siemens came unraveled in late May 2004 when Alstom, France's troubled engineering group, turned thumbs down on any relationship with the German company. Alstom, which manufactured power generation plants, trams, railway locomotives, and railroad infrastructure technology, was teetering on the edge of bankruptcy and desperately in need of a white knight. But despite French government approval for a rescue plan in which Siemens played a part, Alstom's chairman, Patrick Kron, rejected such an arrangement on the grounds that it was not in the best interests of the French company's customers or shareholders. Alstom was best known for its production of France's famed TGV (Très Grande Vitesse) trains.
FURTHER GOALS IN CHINA
In May of 2004 Siemens announced plans to ramp up its presence in China, more than doubling its regional offices from 28 to 60. Von Pierer told Agence France Presse that he saw "good chances of doubling today's sales volume in the next three years" (May 17, 2004). He predicted that China's market would grow approximately 10 percent a year for the short term. To increase its share of the Chinese mobile handset market, Siemens partnered with Ningbo Bird Company, one of China's largest manufacturers of handsets. Under their agreement, Ningo Bird was to sell Siemens mobile phones through its network of 30,000 shops throughout China. In the realm of mobile technology Siemens was working with state-owned Datang Telecommunications to develop China's third-generation mobile technology standard, TD-SCDMA.
In an article on globalization written for the 2003 issue of Global Agenda, von Pierer observed, "The global challenges of our times—whether political, economic, or social—can be mastered only through intelligent, targeted, and responsible international cooperation." He wrote that Siemens, as a world leader in electrical engineering and electronics, was dedicated to developing and providing "life technologies" that could secure, ease, protect, and enrich lives. He said that as more and more people around the world, particularly in developing countries, benefited directly from such technologies, they would become less apprehensive about globalization. "It is the task of globally operating companies to spread such benefits and make certain this positive side of globalization is known to all."
See also entry on Siemens AG in International Directory of Company Histories.
sources for further information
"Alstom Rules Out Alliance with Siemens," Xinhua News Agency, May 26, 2004.
Aston, Adam, "Industry Insider: He's Putting Siemens on the American Map," BusinessWeek, February 4, 2002.
Baker, Stephen, et al., "Europe: A Case of Too Little Too Late?" BusinessWeek, November 16, 1998.
Barker, Paul, "Siemens and the New Germany," Computing Canada, August 3, 1993.
Boston, William, and Frederick Kempe, "Siemens CEO Plays to Win, No Matter Who He Opposes," CareerJournalAsia.com, http://www.careerjournalasia.com/myc/management/20010216-boston.html.
Brierley, David, "Chairman Who Refuses to Be Radical," The European, January 16, 1997.
Culp, Eric, "Siemens Sings the Same Old Song," The European, July 20, 1998.
Ewing, Jack, "Germany: All Eyes on the Corner Office," BusinessWeek, March 1, 2004.
——, "Germany: Is Siemens Still German?" BusinessWeek, March 17, 2004.
——, "Siemens Proves Prudence Is a Virtue," BusinessWeek, November 11, 2002.
Fagerfjall, Ronald, "Germany Joins the Big Boys to Play the International Field," The European, August 25, 1995.
"France Backs Siemens Role in Alstom Plan," Associated Press, April 28, 2004.
"Germany's Siemens Eyeing Big Acquisitions," Tech Europe, March 5, 2004.
Gold, Steve, "Siemens Reveals Ambitious Sales Plans for Next Decade," Newsbytes, June 2, 1992.
Richtmyer, Richard, "Why Siemens Is Exiting the Chip Business—Enough Already," Electronic Buyer News, November 9, 1998.
"Siemens Reaps Benefits of Cost Cutting with Profit," Birmingham (U.K.) Post, November 14, 2003.
"Siemens to Invest One Billion Euros in China in Near-Term," Agence France Presse, May 17, 2004.
Von Pierer, Heinrich, "Taking Responsibility for Corporate Actions," Global Agenda, 2003.