Wind turbine giant Siemens Gamesa to lay off 10% of workforce

Delivery delays and the rise in material costs forced Siemens Gamesa to cut 2,900 jobs as part of its turnaround plan. The company said it would focus on the offshore wind segment.

All major wind turbine manufacturers in Europe have been suffering losses due to rising input costs and the logistical issues that emerged with COVID-19 lockdowns. Siemens Gamesa, based in Hamburg, is especially hit in its onshore business, so it turned to job cuts.

The company said it would reduce its workforce by 2,900 people on a global scale by the 2025 fiscal year, adding that it is one of the measures from its Mistral strategy program, launched last year. The aim is to return to profit in the long term and create “a simplified and leaner structure.”

“In order to realize the company’s projections for growth, Siemens Gamesa is working to strengthen specific areas within key leading markets to capitalize on its strong market position in offshore, as well as growing across the entire value chain and driving a project-centric business approach,” the statement reads.

Denmark hub to shrink most

The company revealed plans to shed 800 jobs in Denmark, 300 in Germany, 475 in Spain and 50 in the United Kingdom. Details for all affected countries will be defined in negotiations with the workers’ councils, the management pointed out.

Majority owner Siemens Energy launched a complete takeover attempt in May

“It is never easy to make such a decision, but now is the time to take decisive and necessary actions to turn the company around and ensure a sustainable future. We need to build a stronger and more competitive Siemens Gamesa to secure our position as a key player in the green energy transition,” Chief Executive Officer Jochen Eickholt stated.

Siemens Energy, which controls more than two thirds of its subsidiary, said in May that it wants to take over the entire business.

Wind farm operators don’t benefit from energy inflation

According to WindEurope, which represents more than 400 firms and associations in the industry, slow permitting keeps the wind turbine market at less than half of what it should be to deliver the REPowerEU plan. Furthermore, some countries even allow negative bidding at auctions, so developers then have to pay for the right to build a wind farm, the organization said in a recent analysis.

“Higher steel prices and shipping costs and supply chain bottlenecks make turbines more expensive. Manufacturers have to absorb these additional costs, especially when their contracts with developers aren’t indexed, because of the time-lag between a wind turbine order and its actual delivery… Today nearly all of Europe’s wind turbines are made in Europe. But Chinese manufacturers beat the European industry on price and are starting to win orders in Europe,” WindEurope said.

Most wind farms have fixed income, either from a government auction contract or a power purchase agreement (PPA) with an energy consumer. Or they have hedged against wholesale market price fluctuation. Such wind farm operators therefore don’t earn the upside when electricity prices rise.