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Siemens’ Peter Loescher: The cleanup man who was swept aside

Peter Loescher

Anthony Jenkins/The Globe and Mail

Peter Loescher cuts a dashing and powerful figure. When I greeted him, he rose from his chair and kept rising until he seemed to fill the room. He is 6-foot-4 and so lean that he looks taller. He bears a passing resemblance to George Clooney, complete with pepper-grey hair and intense blue eyes.

Until the end of July, Mr. Loescher's physical presence was more than matched by his corporate presence. That's when he was fired as the CEO of Siemens, the engineering and technology giant that was described by chancellor Angela Merkel as a German "flagship."

Siemens, with 370,000 employees worldwide, makes everything from steam turbines to the trains that compete with Bombardier's to magnetic resonance imaging machines and postal sorting systems. It is Europe's answer to General Electric, and when its executive suite goes into turmoil, as it did in the summer, all of Germany reads about it with a fervour normally reserved for a Bayern Munich-Werder Bremen football match.

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Indeed, Siemens rarely disappoints fans of the gory. Only a few years ago, the company suffered a near death experience when it admitted to one of the biggest bribery scandals in German history, one that Mr. Loescher was hired to clean up.

When we met on a warm, sunny day in early September, Mr. Loescher was still very much in the news. He had given no interviews since his exodus from Siemens a month earlier, leaving the press free to speculate about the motive behind the sacking. Sadly, my repeated and annoying (to him) efforts to get to the story behind the story and scoop the German press proved futile.

"I simply do not want to make any comment," he said, before treating me to some home-spun philosophy. "I come from a mountain environment. I am Austrian. When you are mountaineering and you approach summits, there is only one way – to look forward and make sure the footing is solid. I'm thinking about the next 15 years."

At the same time, he had a bit role in another story gripping the nation – the apparent career implosion of former Deutsche Bank CEO Josef Ackermann, one of the world's best-known financial services bosses.

When I interviewed Mr. Loescher, Mr. Ackermann had just resigned as chairman of Zurich Insurance over the suicide of the company's finance chief, Pierre Wauthier. His suicide note named Mr. Ackermann, leading to Zurich's pledge to investigate whether the chairman had put too much pressure on Mr. Wauthier. While we did not know it at the time, Mr. Ackermann was about to resign from the board of Siemens, where he had, reportedly, played a key role in the ultimately futile effort to keep Mr. Loescher employed. Mr. Ackermann backed Mr. Loescher at first, then caved in and voted to oust him.

Mr. Loescher has friends in high places. I met him in the private offices of the chairman of Deutsche Bank, Paul Achleitner, in the late baroque Preysing Palais, which is attached to the monumental loggia known as the Feldherrnhalle (Field Marshall's Hall). The hall was the scene of the Nov. 9, 1923 battle between Adolf Hitler's supporters and Bavarian police that killed 20 and led to Hitler's arrest two days later.

Mr. Loescher had installed himself in a small, unadorned meeting room on the sixth floor when his communications adviser and I, armed with a bag of warm croissants, arrived.

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His friends say he is deeply saddened by his ouster from Siemens. If so, he hid it well. Mr. Loescher, 56, was enthusiastic about Siemens' prospects and proud of his accomplishments during his six years as CEO. He tended to use the present tense, as if he were still running the show. For instance, when I asked him about his relationship with Russian President Vladimir Putin, he said: "The company and I have very good relationships with the core leadership. In all these markets you must have this." (Siemens's Russian portfolio went from one manufacturing site to eight under Mr. Loescher.)

He is a genuine world citizen. He was born in the Austrian village of Villach, near the Italian border, where his father had a forestry business, and received a master's degree from the Vienna University of Economics and Business Administration. A fervid globe trotter since then, he also attended the Chinese University of Hong Kong and Harvard.

He is fluent in English, German, Italian, French and Spanish and speaks some Japanese and Chinese. His wife, Marta, the daughter and granddaughter of former presidents of FC Barcelona, is Spanish and Mr. Loescher confesses to be mad about Barcelona – "my favourite city" – and its football club. The only time he seemed to relax and smile in our 90-minute meeting was when he talked about Barca.

His career stints landed him at German chemicals and life sciences company Hoechst (now part of France's Sanofi pharmaceuticals group), which propelled him into ever senior management positions in Spain, Japan, Britain and the United States. He later worked for Amersham, the medical diagnostics maker that was bought by General Electric, and Merck. His reputation rose to the point that he was tapped in 2006 to rescue Siemens from itself, becoming the company's first outside CEO since its founding in 1847 by German inventor Werner von Siemens.

Siemens was then in the midst of an existential crisis that proved highly embarrassing to all of Germany. American and European investigators had accused it of serial bribery payments, totalling some $1.4-billion (U.S.), to win contracts for everything from Venezuelan mass transit orders to a role in the United Nations oil-for-food program in Iraq under Saddam Hussein. In 2008, Siemens paid a record of $1.6-billion in fines to authorities on both sides of the Atlantic.

"I think the company made the right choice to look for an outside CEO," Mr. Loescher said. "This company was down on its knees from this widespread corruption. You had to ask someone who was absolutely clean to resolve this situation and drive fundamental change."

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Mr. Loescher said he was "uncompromising" in his compliance and integrity message. The new broom then went on to clean up the operating structure, reducing the confusing portfolio of nine divisions to four – energy, industry, health care and urban infrastructure. The head count was reduced by about 30,000 and new programs were launched, such as developing trains and other electrical products that were 30 per cent more energy efficient than the previous generation.

It all seemed to go pretty well, in spite of the 2008 crash and deep recession that followed. But there were also mistakes. The solar power division, which lost €1-billion ($1.4-billion Canadian), had to be shut down. The late delivery of trains to Deutsche Bahn cost Siemens a fortune in fines. The offshore wind turbine business in the North Sea took a €600-million write down.

But it appears that the missed profit margin target was the biggest mistake. In 2011, Mr. Loescher announced an annual sales target of €100-billion, about a quarter more than the company was booking at the time. He then set an ambitious profit-margin goal of 12 per cent by 2014, up from 9.6 per cent in 2012.

By the summer, it was apparent that both goals would be missed and the knives came out for Mr. Loescher. On July 27, the Siemens board tersely announced it was reconsidering his position.In late July, he was replaced by Joe Kaeser, the chief financial officer. During the turmoil, Chancellor Merkel said she hoped Siemens would return to "calm waters."

Since Mr. Loescher refuses to comment on his termination, it's hard to judge whether the missed targets can fully explain his firing. Something didn't add up, because many ratios improved substantially during his six years in the saddle. The industrial profit margin went from 8.6 per cent in 2007 to 9.3 per cent, handily outpacing the margin-improvements at GE and Swedish rival ABB. Return on capital employed went from 6.2 per cent to 17 per cent while revenues in the high-growth emerging markets rose 160 per cent.

While Mr. Loescher left Siemens with a smaller market value when he left (€83-billion) than when he arrived (€103-billion), GE and ABB have yet to recoup their pre-crash market highs.

An investment banker who knows Siemens, but did not want to be identified, suggested that the company's management was never happy with an outsider as CEO; when he had finished the cleanup job, he was sent packing. Perhaps.

But that's all history and Mr. Loescher is looking for his next challenge. He said he is "open for global corporate jobs," but also hinted foundation or charity jobs also appeal to him. He loves the arts and education and is the Munich-based chairman of the Siemens Foundation, an education charity that is involved in creating a technology school in Nelson Mandela's hometown.

"When I was age seven, I wrote to my primary school teacher that I wanted to become a diplomat," he said. "I had no clue what a diplomat was, but my answer probably meant I was very interested in cultures. I have always tried to learn from cultures."

Mr. Loescher is back on the job market and, no doubt, his phone is ringing. But FC Barcelona is also on his mind. "The one thing for sure is that I will be much more visible at Barcelona games," he said.

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CURRICULUM VITAE

Background

Born in Villach, Austria, into a forestry products family.

Educated at Vienna University of Economics and Business Administration, Chinese University of Hong Kong and Harvard.

Speaks English, German, Italian French, Spanish, some Japanese and Chinese.

Passions

A self-described sports fanatic, he loves skiing, mountaineering, sailing, tennis, running and water skiing.

Favourite ski resort is Lech, Austria.

Collecting contemporary art from Latin America and Spain; FC Barcelona games.

Dream job

"My dream job is one I will never be able to have – president of FC Barcelona." Noted that his father-in-law, Agusti Montal i Costa, was the man who, in 1973, recruited Johan Cruyff, the Dutch striker who was undoubtedly one of the finest soccer players of the past century.

Quote:

On whether the euro-zone crisis will break the common currency:

"I am convinced it will remain intact. This is a major political project, not just an economic one."

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About the Author
European Columnist

Eric Reguly is the European columnist for The Globe and Mail and is based in Rome. Since 2007, when he moved to Europe, he has primarily covered economic and financial stories, ranging from the euro zone crisis and the bank bailouts to the rise and fall of Russia's oligarchs and the merger of Fiat and Chrysler. More

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