Siemens has sprung up from global supply chain ‘rollercoaster’

The head of Siemens, Europe’s largest industrial manufacturer, compared the world’s supply chains to a “roller coaster” as prices for materials such as metals and resins plummeted due to an economic recovery. irregular.

“At least for the next two quarters, we’ll see that [price] pressure, “general manager Roland Busch told the Financial Times.” Markets are so volatile. ”

The physicist, who took over the leadership of the German group in February, said the speed of the global recovery had a “delayed effect” on Siemens suppliers, who were still struggling to meet demand.

The sudden boom in orders last fall, following a sharp drop, induced by a pandemic, resembled “a very sharp V … in China it was a very, very sharp V,” Busch said. .

“If that’s what happens in the big markets, you’re running a roller coaster in your chain… You have this hysterical effect, and that’s exactly what we’re seeing.”

Busch’s comments were the last index of purchasing managers, published by IHS Markit on Wednesday, showed that disruption to global supply chains – particularly the lack of steel, copper, wood and plastic – had raised input prices for energy companies. eurozone at the fastest pace in more than a decade.

PMI data, including the largest increase in average invoiced prices for goods and services since 2002, indicate that pressures are likely to continue after rising May inflation above the European Central Bank’s target of just under 2 percent for the first time since 2018.

However, central bankers such as ECB President Christine Lagarde have predicted that the rise in inflation will be “transient” and said supply constraints will disappear by next year.

In the June PMI report, there were the first signs that restrictions could be relaxed in Germany after “a slight drop in the number of companies reporting longer delivery times on materials and components”.

Busch of Siemens said that, for now, the group has been able to pass on the prices of the materials to its customers, without losing business.

“Our competitors are sitting in the same boat, made up of the same suppliers,” he said. “As long as we have innovative products, we also have some pricing power.”

Siemens, which has undergone a major overhaul and has shut down its health and energy activities, is preparing to unveil the next step of its transformation from a conglomerate to a more focused group of companies, complemented by a software expertise.

“Our customers benefit from our ability to connect the real and digital world,” Busch said.

The group’s core activities, which focus on factory automation and digitization, building and electrical network management, and the creation of trains and infrastructure, will pursue acquisitions in “highly attractive adjacent markets,” he added.

Busch cited the recent acquisition of California-based company Supplyframe, an online marketplace for electronic components, for $ 700 million as an example of the kind of acquisitions Siemens would like to make in the future.

Siemens said it expects its revenues from software, which was 5.3 billion euros by 2020, to grow at a compound annual rate of about 10 percent over the next four years.

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