Newly elected Siemens CEO Joe Kaeser gestures during a news conference in Germany's Siemens AG headquarter in Munich on Wednesday. Picture: REUTERS
Newly elected Siemens CEO Joe Kaeser gestures during a news conference in Germany's Siemens AG headquarter in Munich on Wednesday. Picture: REUTERS

MUNICH — Siemens on Wednesday named its chief financial officer, Joe Kaeser, as CEO to take over from Peter Loescher after Europe’s biggest engineering company repeatedly missed profit targets and charges mounted for failed power and train projects.

Mr Kaeser will start his new role on Thursday, the Munich-based company said. The move was expected, so trading in the stock remained flat.

Siemens also on Wednesday reported a 31% drop in quarterly operating profit. Mr Loescher last week cut a profit forecast for the fifth time in his six years at Siemens, underlining the challenges for Mr Kaeser to oversee a company that has 60 sub-units and manufactures products including trains, gas turbines, medical scanners and factory automation gear.

Mr Kaeser’s 33 years at Siemens may help him to cut through the company’s complexity and focus on more profitable businesses.

"Kaeser was the logical candidate to succeed Loescher," Frankfurt-based Commerzbank analyst Ingo-Martin Schachel, who has an "add" rating on Siemens shares, said.

"It made perfect sense to nominate him."

Mr Kaeser joined Siemens in 1980, holding a series of administrative and financial jobs in a career that took him to Malaysia and California. He became chief strategy officer in 2004 before being promoted to the top finance job in 2006. Siemens will name a new chief financial officer in the near future, the company said on Wednesday.

While other German industrial champions have prospered during the European credit crisis, thanks to their strength in export markets, Siemens has floundered.

Since Mr Loescher, who was recruited by chairman Gerhard Cromme, took the helm in July 2007, the shares have declined 22%. Volkswagen has more than doubled in that period, while BASF, the world’s biggest chemical company, jumped 42% and Germany’s largest drug maker, Bayer, climbed 55%.

Mr Loescher, an Austrian national, who joined Siemens from pharmaceuticals maker Merck as the company’s first external appointment as CEO, has had to write down the value of several acquisitions, and drove a failed push into environmentally friendly energy that led to spiralling costs.

"We’ve been too preoccupied with ourselves lately and have lost some of our profit momentum vis-à-vis our competitors," Mr Kaeser said. "My declared aim is to put Siemens back on an even keel."

Siemens had a profit margin of 9.5% last year when competitors ABB and General Electric had margins of 10.3% and 15%, respectively.

"During the past week, I came to the conclusion the foundation of trust necessary for me to remain was lacking," Mr Loescher said.

Profit from the main healthcare, industry, infrastructure and energy divisions fell to €1.26bn in the third quarter, from €1.82bn a year earlier, the company said. Sales fell 2% to €19.3bn while Siemens’s order backlog reached a high of ¤102bn.

It agreed to sell its share in a six-year phone equipment venture to Nokia for €1.7bn last month, with Mr Kaeser leading negotiations. He said he would give more details on the "further refinement of our company programme and address the medium-term prospects and our vision" by Europe’s autumn.

Bloomberg