Dennis Sadlowski on the Siemens Reorganization

July 23, 2008

Dennis Sadlowski—

Siemens AG- New Structure for Sustainable Growth

There’s a lot of change going on in the world of automation, and that’s why you’re here.

Dennis Sadlowski—

Siemens AG- New Structure for Sustainable Growth

There’s a lot of change going on in the world of automation, and that’s why you’re here.

There’s a lot of change going on at Siemens…in the 160 year history of the company there have been lots of changes, but the changes of the last 6 months have been the most significant in the past 20 to 30 years.

We reorganized in the last six months into three sectors, Industry, Energy and Healthcare. Industry Sector is 51.3% of sales, Energy is 27.8% of sales, and Healthcare is 14.2% of sales. There is also Cross-sector activities, Siemens IT solutions and services and Siemens Financial Services, accounting for about 6.7% of sales.

The Industry Sectior includes Automation and Drives, Building Automation, Industry Services and Mobility.

Why adapt Siemens? Megatrends.

Urbanization: in 2007 the majority of the people in the world lived in cities for the first time.

By 2015, 350 million people in megacities worldwide.

Demographic change: average life expectancy incrasing globally from 46.6 (1950) to 80 (developed world now). Global population growth from 6 billion to 8 billion by 2025.

Climate change: Highest concentration of CO2 in 350,000 years. Manufacturing MUST be sustainable.

Siemens answers the world’s toughest questions. We’re going to get older, more of us are living in cities, and we’re all going to get good tans…what are we doing as Siemens to address these issues? Siemens answers. Our Healthcare sector is positioned well to help with the demographic health care issues. Energy demand will increase in 40% over the next 25 years. Energy diversity will change little in the next 10 yearss, and increase of CO2 emissions will continue. Siemens answers. We’re the market leader for offshore wind energy facilities, and we make the world’s larges, most efficient gas turbine. “Performance Contracting” offers a complete portfolio for energy efficient solutions in buildings. We’re making significant investments in our plant in Elgin and Iowa in wind turbine gearing and blade manufacturing. More than one billion people are without drinking water, and the increasing world population requires efficient production and supply of food and goods, and there’s a growing public demand for security. Siemens answers. We’re the leading developer of systems for the factory of the future, with an entire portfolion for mobility systems, the number one provider of products and solution for the entire range of water treatment and efficient security solutions.

Strateginc Innovation Planning: We bring people together to try to build “Pictures of the Future” that can lead our business through strategic vision over a long term. We’ve been retropolating today’s influencing factors, and the result of this is the restructuring of our portfolio to better meet today’s conditions and the future.

Continuous analysis of R&D investiments on profitability, growth potential, and comparison with peers (absolute and relative). R&D investment should reinforce our strengths, improve performance position of low performers, and enable profitable growth and leading market position of high growth areas. We spend 48% of our R&D expenditure on high profitability investments.

Market Ready Innovations:

When we get it right, we have produced high added value innovations for our customers, innovations focused on major growth markets, and innovations that set trends.

Innovation is like a marathon. It is easier to run with the pack in any large race. It is a little more difficult, it is a much greater challenge to say to yourself, “I’m going to get out of the pack and lead this marathon.” It is a lot more lonely out there, setting the pace in innovation.

We don’t do any of this alone. We have university partnerships, and we support STEM education at all levels. GO PLM (4 billion in PLM tools in in-kind donations) and ELLDP (we track down good students and make them interns and rotate them through our programs…the exiderdome tour guides come from this program), and we sponsor Siemens Science Days.

We work with MIT and UC Berkeley on energy management projects.

Siemens values: highest performance with highest ethics

Responsible: committed to ethical and responsible actions. Excellent: achieving high performance and excellent results Innovative: being innovative to create sustainable value