Why water was not the right fit for Siemens

Put up for sale only weeks ago, Siemens Water Technologies (SWT) has said that water treatment was outside of the scope of its industries division future strategy but that it would be a good acquisition for an industrial buyer.

Speaking to Water & Wastewater International (WWi) magazine, Dr Lukas Loeffler, CEO of SWT, said: “Looking at the water treatment business that we run as a process company, I think this is clearly outside the main scope of Siemens Industries’ future strategy.

“This strategy I would describe as automation controls, drives, motion controls, sensors and actuators which are all part of the electrically automated business…We are dealing with the treatment of water, which is a process related technology and therefore outside of the scope of Siemens.”

It was at the beginning of November that Siemens announced it would sell off SWT, which provides technology formunicipal and industrial potable and wastewater applications.

The company said in a statement: “In the future, we will concentrate our water business on solutions along our core areas of expertise in electrical engineering.”

Siemens entered the water treatment market in 2004, following the much publicised acquisition of USFilter from Veolia Environnement for $993 million. At the time the acquired business had reported sales of $1.2 billion and employed around 5,800 people.

Loeffler believes that part of the challenge for the company stemmed from the initial integration of USFilter.

He said: “When the company came to Siemens in 2004-2005, initially the first leaders in Siemens were busy with a whole bunch of other topics. So from the point of view of managing the business, it was never integrated in a way that you had complete oversight of the individual locations, other than the financial level.”

Loeffler took over as CEO of SWT, the business unit of Siemens Industry Solutions from Chuck Gordon in October 2010. Since then he said he’s been tightening up the different units of the group.

He told WWi: “What we have changed is the way we integrate processes, such as an overarching supply chain management, overarching order execution and engineering, as well as overarching R&D. We did away with the fragmentation that manifested itself in virtually dozens, probably three dozen small local site dealers, small local site managers that more or less ran their little sites independently.

“With a large company like Siemens, you cannot run a business based on 150 locations with 35 people in each. You need to integrate, create large critical mass and run it like a business. And also create synergies between the units. That’s what we did effectively between 2010 and 2012.”

When asked about the potential value of the group for sale, Loeffler said that figures are not being disclosed at this point in time.

Siemens is not exiting the water industry altogether. Flow, pressure and level meters, together with drive technology – for pipelines, pumps and agitators – will still be available from the company after the sale of SWT, from its Siemens Industry Automation division.

Regarding his role at the group, he said: “I have already made a commitment and will be a part of this group going forward to lead the group into new hands. Then it’s up to the new parent to decide to keep me on board. I am ready to continue with this business as I believe in its future. I would not have spent enormous time and effort over the last three years if I didn’t believe in this business. We have a great story to tell. This is an exciting time for us and also the industry, to not only write the next chapter in our history but also drive the market towards more open industrialisation and I want to be part of this deal of course.”

About 4,500 employees work for SWT worldwide, with 3000 of these based in North America.

Commenting on job security for employees, the CEO added: “I see a great chance for additional growth in an environment that’s even closer to the water environment perhaps than Siemens. With Siemens being an electrical giant we were always a bit on the fringe of the typical activities. If we had a parent closer to the mainstream water technologies business, there are tremendous opportunities for growth. I’m not concerned about the prospects for the people.”

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- The full version of the interview with SWT CEO Lukas Loeffler will appear in the December-January issue of WWi magazine. To sign up for your free copy, please click here.