Roland Busch (Erlangen, Germany, 58 years old) is one of the most powerful executives in Europe. Siemens, the multi-sector giant of which he is president and CEO, is the eighth most valuable company on the Old Continent, side by side with the French Total or the Spanish Inditex. It arrives in Spain with an investment under its belt: 160 million euros in a new headquarters. In recent times, however, the focus has been elsewhere: on the delicate financial situation of Gamesa, the Basque manufacturer of wind turbines owned by its energy subsidiary. The conversation takes place a few days before the German government presented its strategy to deal with China, Germany’s first customer and which is, at the same time, “partner, competitor and systemic rival”, according to the German Foreign Minister, Annalena Baerbock.
Ask. The paradox is powerful: they announce investments of 2,000 million due to the good progress of their main businesses and a week later Siemens Energy sinks on the stock market due to new cost overruns in Gamesa. How is it explained?
Answer. It’s very simple: we are two different companies, and Siemens owns 30% of Siemens Energy. That extra cost of 1,000 million has surprised us.
Q. they didn’t expect it
R. No, because they had already done two profit warnings for exactly the same reasons and we thought (the problem) was over. We are now awaiting the final figure, which we hope is as close as possible to what has already been announced.
Q. Where is Siemens Energy behind these problems?
R. The non-wind power business is doing quite well, and we believe it has been undervalued by the market: gas turbines have recovered and investment in grids is huge.
Q. And Gamesa?
R. It is necessary to differentiate between offshore and onshore wind. In the first case, the quality is good and the prices that come out of the auctions are competitive. It’s onshore wind that doesn’t seem to be under control yet, but I think they’ll be able to turn the tables.
Q. The head of Siemens Energy has gone so far as to allude to “cultural issues”. What do you think?
R. It’s a question you should be asking Christian Bruch (CEO of Siemens Energy) or Jochen Eickholt (CEO of Siemens Gamesa).
Q. But you will also have a position on the matter.
R. I think at Siemens we have a very open culture, with a growth mindset. We try to learn from our mistakes and not make them again.
Q. Do you think the decision to buy Gamesa was the right one? If you were faced with the same dilemma today, would you do exactly the same thing as then?
R. It is a somewhat hypothetical question. You have to look ahead and solve the problems.
Q. Why are all Western wind turbine manufacturers suffering so much?
R. I think they are in a very competitive market and affected by supply chain problems. In the future, it will continue to grow and improve. But the question is in the margins.
Q. Siemens is a good thermometer of the global economy. At what point are we?
R. We see a weak global market in the next two quarters. Rate hikes are putting pressure on consumption, so this low growth is quite natural. We expected China to recover in the second half of the year, but it will probably end up taking a bit longer. India, on the other hand, is doing very well.
Q. Can the ECB go overboard?
R. The biggest risk would have been that the ECB had not been clear and had not raised rates sufficiently. You have taken the right path. We are heading in the right direction, but it will still be a couple more quarters before it gets back to normal.
Q. Beyond the macro, how does the rate hike affect Siemens?
R. We are very well capitalized. There are many companies out there with major financial and refinancing problems. It’s not something that makes me lose sleep at night.
Q. But the higher price of money is penalizing the markets in which they operate.
R. It is something we see, but the markets in which we operate are growth markets and our perspective is long-term. We have tailwinds in automation, digitization and sustainability. If our average annual growth is so high, 7%, it is because we operate in sectors driven by technology.
Q. Aging is a challenge for societies around the world, especially in the West. For you, on the other hand, it is an opportunity.
R. Absolutely. Both because of the health sector and because an aging society will have fewer workers and, if it wants to continue growing, it will have to add digitization and automation. And we have the technology for it. Even in China, the labor market has reached its peak.
Q. Is there a risk that Europe will be left behind after the Inflation Reduction Act in the US?
R. Yes. The big difference is that the money is invested faster there. In Europe, although many investments are also arriving, such as in battery factories or hydrogen, everything takes more time. Even when the money is ready, there is a lot of regulation to follow until final approval.
Q. Do you see the US market as more attractive then?
R. Our revenue exposure to the US is 24%, compared to 18% for Germany or 13% for China. We love our projects in Europe, because we have an ecosystem here and a very strong, long-term relationship with our clients. Our only point is that of regulation. We have to adopt and deploy technology as quickly as possible, because innovation is a key factor for Europe’s future success.
Q. How do you see the Western attempt to disengage from China?
R. I wouldn’t talk about decoupling because, to me, it’s not a real thing. It won’t happen. The commercial and technological link is so great that it is not an option. What we are seeing is a diversification of companies to increase their resilience. It’s nothing against China or any other country: any kind of dependency is good. We must go towards a multiple supply, with at least two countries and two supplier companies.
Q. He prefers, then, the “China+1″ strategy.
R. I don’t like that expression either, because it doesn’t matter which country we’re talking about: for others, over-reliance may be on the US. Honestly, if we’re talking about critical reliance, let’s just think that more than 90% of the world’s high-performance chips come from a single company (TSM) and a single country (Taiwan). Cost optimization, opting for the cheapest over and over again, is what has brought us here.
Q. Do you feel pressure from investors to reduce dependence on China?
R. We have 40,000 employees in the US and 30,000 in China. We will defend our market share and expand it if we can. And, at the same time, we analyze any kind of dependency on our supplies. I don’t feel any pressure to stop following that strategy, which is positive for the company. We have just announced an investment of 2,000 million: in China, in Singapore, in Spain, in Germany, in the US… I feel very comfortable.
Q. Do you consider the energy crisis over?
R. It’s over, yes, but we’re in the midst of a major transformation. We are going to need a lot of investment in storage and network management, which are no longer unidirectional. You have to spend money now to have cheap energy in the future: the speed of the transformation is not enough to meet the objectives. We have yet to reach a momentum to comply with (the) Paris agreement.
Q. In the midst of the relocation of value chains, is it feasible to bring industry back to Europe?
R. Yes Yes Yes. Europe is a huge market and the best thing you can do is invest in key industries that you want to be here: hydrogen, batteries, semiconductors… Technology, digitization and automation allow us to build competitive factories in high-cost countries.
Q. 2023 has been the year of the definitive hatching of artificial intelligence.
R. It was only a matter of time. And we are still at the beginning of what we will see in the next 10 years: the most exciting is yet to come. Artificial intelligence will be necessary to continue to grow with labor markets with fewer and fewer workforces.
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