On the move: Gerhard Cromme and Serge Tchuruk

Siemens' new chairman Gerhard Cromme has a reputation for toughnesss and a reorganisation of the board is what he has in mind.

by World Business
Last Updated: 23 Jul 2013

Cromme's first few weeks as the new chairman of Siemens were probably the most challenging he has faced in his career - and this is a man who holds nine supervisory board positions. It began with a boardroom showdown that led to the pending departure of CEO Klaus Kleinfeld; just a day after Cromme's appointment, Kleinfeld announced that he would not be seeking an extension to his current contract.

It is understood that Cromme believed Kleinfeld's position had become untenable amid the ongoing bribery scandal. In December, Siemens said it had uncovered $570 million in suspicious transactions covering the previous seven years, and a subsequent internal investigation has reportedly revealed a significantly higher figure. Although Kleinfeld has not been implicated, the scale of the alleged bribery raises questions of how and why he didn't know about it.

Cromme is no stranger to controversy. He built a reputation as a corporate bruiser as chief executive of steelmaker Krupp-Hoesch, when he engineered the attempted hostile takeover of rival Thyssen in March 1997, sparking a major labour dispute. Cromme was pelted with eggs and tomatoes by workers fearing job cuts, and the takeover bid was eventually withdrawn. However, the two companies were merged later and Cromme's name became synonymous with toughness, with one German newspaper calling him 'Mr Merciless'.

When the extent of the bribes scandal became apparent, Cromme, who was previously chairman of Siemens' audit committee and a member of its supervisory committee, is reported to have said: "I never believed in my wildest dreams that something like this could be possible. It is inconceivable that it was so widely spread and nobody knew anything."

However, Peter Loscher, who will replace Kleinfeld as CEO on 1 July, has some bug shows to fill. During his two-year reign, Kleinfeld successfully restructured the company by selling the loss-making telecoms equipment units and spending $7.6 billion on acquisitions to strengthen core businesses. Certainly, his record speaks for itself: just a few days after he announced his departure, Siemens announced quarterly operating profits of $2.7 billion - up 49% on the same quarter last year. If Loscher does not match this performance, Cromme may yet regret forcing Kleinfeld out.

CV AT A GLANCE ...
1971: Joins Compagnie de Saint-Gobain
1986: Joins Krupp Group
1996: CEO, Krupp-Hoesch
2001: Chairman, supervisory board, Thyssen-Krupp
2003: Member, supervisory board, Siemens
2005: Chairman, audit committee, Siemens
2007: Chairman, Siemens

IN COMPARISON ... SERGE TCHURUK, CHAIRMAN, ALCATEL-LUCENT

Appointed just four months before Gerhard Cromme became chairman of Siemens, Serge Tchuruk's first few months as chair of telecommunications equipment manufacturer Alcatel-Lucent were equally challenging. Formally established through a merger between French firm Alcatel and its US rival Lucent in December, Alcatel-Lucent has struggled since posting a 2007 first quarter loss of EUR246 million ($334 million).

Before the merger, which was announced in April last year, Tchuruk was chairman and CEO of Alcatel. His counterpart at Lucent, Pat Russo, has assumed the CEO role at Alcatel-Lucent. The logic behind the merger was increasing competition in the telecom equipment business, in particular from emerging markets such as China. Executives have promised that the company will deliver annual cost savings of EUR1.4 billion by 2009, by cutting 9,000 jobs, merging research and development, and ridding itself of outdated products.

Alcatel-Lucent has set a target of 4%-6% revenue growth for 2007, but has refused to set a target for profit, citing uncertainty around the merger. The company claims it is on target to achieve EUR600 million of savings by the end of year and predicts second quarter revenue growth of about 10% from the first quarter.

CV AT A GLANCE ...
1964: Joined Mobil Corporation
1979: CEO and chairman, Mobil Benelux
1983: Managing director, Rhone-Poulnec
1986: CEO and chairman, Orkem
1990: CEO and chairman, Total
1995: CEO and chairman, Alcatel
2006: Chairman, Alcatel-Lucent

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