Joe Kaeser has become accustomed to walking on red carpets in world capitals alongside Angela Merkel, turning on the charm with heads of state as the unofficial poster boy of German industry.
But the Siemens chief executive, once the darling of the capital markets for his commitment to an aggressive restructuring of the 172-year-old conglomerate, now finds himself in a less appealing role.
With his tenure at the top of Germany’s most recognisable industrial brand due to end in 2021, the personable Mr Kaeser is facing an open revolt from key investors and persistent press predictions of a premature departure.
Six-and-a-half years after taking over a sprawling business in trouble, the Bavarian, who has spent almost 40 years at Munich-based Siemens, is credited with securing the group’s future through zealous cost-cutting and a series of mergers and spin-offs.
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Yet Siemens’ share price lingers in the same region as three years ago, with hopes of a revival likely to be held back by a slowing global economy that Mr Kaeser warned last week would continue to weigh on the group’s sales.
In an interview with the Financial Times, the 62-year-old said he was still in the midst of fortifying Siemens against “massive transformative environments” that threaten the company’s profit pool, such as smarter cloud computing.
When it came to defending his legacy Mr Kaeser, who has a named successor, Roland Busch, waiting in the wings, struck a combative tone.
The wounds inflicted by Brussels in February when it blocked the merger of his company’s high-speed trains unit with France’s Alstom, were still apparent as he slammed the body, which he sees as having foiled a move to fend off Asian competitors.
“There is no point” in having a European Commission, if it “doesn’t come up with a joint approach on foreign economic policy, which enables us to be on the same table as China and the US”, he said.
If the commission, soon to be led by compatriot Ursula von der Leyen, fails to push through reforms that prevent such a scenario from recurring, it will amount to “nothing but a costly bureaucracy”, he said.
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Mr Kaeser, a staunch pro-European, insists that Siemens will never make investment decisions based on political behaviour. But he betrays a frustration at the lack of plaudits for his company’s commitment to German society.
“I spend €7bn [per year] on research and development,” Mr Kaeser said, sitting in his office at the company’s political headquarters, in the heart of Berlin. “I don’t need to spend this in Germany. If 9 per cent of our business is in Germany, 90 per cent is elsewhere in the world.
“We have options. We are one notch above territorial boundaries. I can go to the US, I can go to China, I can go to India, where the business happens, but I believe we also have a responsibility to help this divide come together between the winners and the losers of the digital age.”
Precisely what Mr Kaeser’s responsibilities are has become a matter of heated debate. Investors, who unanimously worshipped the former chief financial officer for his determination to slash billions of euros in costs in the face of union resistance, are beginning to get restless.
While many shareholders have kept their counsel, German institutional investors Deka and Union have vocally opposed an extension to Mr Kaeser’s contract.
“All I hear is technology, leadership, artificial intelligence, cost savings, decentralisation — these words are all fantastic, and the story they tell is also fantastic, but so far I haven’t seen any outperformance,” said Union portfolio manager Vera Diehl.
Another top investor said there had been a marked shift in attitudes towards Siemens. “Up until recently, Joe Kaeser stood for hitting numbers. That impression changed over the course of the past 12-18 months.”
Never one to sit back and take the blows, Mr Kaeser waited until the company beat expectations for the fourth quarter last week to launch his counter attack.
“I don’t think I need to prove anything to anybody any more,” he said. “I totally turned around this company from 2013, when it was in very bad shape, to a meaningful company. Is it the best? No it isn’t. Can we do more? Absolutely. Did everything go the way I thought? Absolutely not.
“But, you know, we were at €75, €76 [euros per share] now we are at €105. It should actually be €130, honestly. We are a predictable company, we’ve made our guidance for five years in a row without any corrections.”
Indeed, Siemens is in better shape than Germany’s other main conglomerate, Thyssenkrupp, which was relegated from the Dax in September after repeated profit warnings.
American rival GE is a shadow of its former self. But margins at competitors such as Honeywell and France’s Schneider Electric have outpaced Siemens over the past few years, despite an uncertain economic environment.
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Mr Kaeser, a frequent critic of the “unnecessary” US-China trade war, said the turbulence in global markets has damped demand during “the biggest transformation of this company’s history”.
“If you’re in the capital goods sector, and you have uncertainty, you are not going to invest in a factory,” he said, referring to Siemens’ core Digital Industries division, which provides integrated hardware and software systems for manufacturing plants.
“I would have loved to have my back a little more free from an economic downturn like this,” he said. “I would have loved to pay a bit more attention to the structural, strategic execution than look at the operational correction of weaker demand.”
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It is an argument that is met with little sympathy from Union’s Vera Diehl. “Call it Donald Duck or Donald Trump, we have to outperform the index,” she said. “Agile businesses don’t blame external forces for their failures.”
When Mr Kaeser, who worked in California in the 1990s, talks about decentralisation, he echoes such sentiments.
He talks of “killing the dragon” and creating a “fleet of ships”. He maintains that employees have a responsibility to “contribute to their own future” and reskill. But talking to society at large, he warns against a ruthless focus on the bottom line.
“In the investors’ environment people are still, and rightfully so, into [economist] Milton Friedman’s priorities — ‘the business of business is business’,” he said. “Deliver the margin, get me the dividend, and just move on, and if you don’t know how to do it then you’d better go.”
He added: “That’s fine, because that’s how the financial industry works. But what I’m saying is if the business of business is business, I don’t get this transformation done. No way in hell.”
He dismisses calls to speed up Siemens’ restructuring and further reduce the company’s headcount.
“Things are deteriorating,” he said of the political climate in Germany and beyond. “If we push this shareholder value even higher, we will make richer people richer, because we basically help the equity holders to be more wealthy, and that cannot be maintained.
“We’ll have burning cars on the street and not self-driving cars,” he said, sounding like a different person from the one that recently announced almost 12,000 job cuts.
Notwithstanding this dual focus, Mr Kaeser still has plenty of admirers.
“The strategic decisions he was able to get through were correct, and I think they were brave,” said Marcus Poppe, of asset manager DWS, a top Siemens investor, of moves including a flotation of the company’s healthcare business and the planned spin-off of its gas and power unit.
Daniela Bergdolt, who represents retail shareholders through an organisation called DSW, said Siemens’ share price “doesn’t reflect the state of the company at the moment”.
For Mr Kaeser’s part, the muted share performance is down to a “conglomerate discount” of about 40 per cent in an environment in which investors prefer slimmer companies, coupled with anxiety over Siemens’ many “high-margin short-cycle” businesses.
“The message is watch and see,” he said, adding that he expects to see a re-rating once the spin-off of Siemens’ energy business is pushed through next year.
Mr Kaeser will have few options left if a pick-up fails to materialise.
“He knows he cannot do anything major any more — no more open heart surgery,” said a close observer of his. “He’s almost like a US president in a second-term, he is playing for his obituary.”
Speculation as to Mr Kaeser’s second act is rife. The usual route, from chief executive to chairman, is blocked by Jim Snabe, a younger incumbent. Frequent forays into the political arena, sometimes motivated by the memory of family members killed in Nazi concentration camps, have fuelled rumours about a move to elected office.
The man who is famed for ruling his boardroom with an iron fist, claimed he would have “no patience” with battling for voters’ approval, but that has not stopped him developing a manifesto for the future of the German economy.
“I have more to lose than an election,” he said. “I run a company, I spent twice as much of my life in that company than not, so I care about the future of this company and these people.
“We cannot afford to leave this country here to dreaming about how good the past has been, while the future is made by somebody else,” he added, looking out over the German capital.
“Because if you think five, 10 years further, when the internet finally has reached the industrial world, there are hundreds of thousands of jobs being cut, because the value chain becomes more efficient. You’ve got to provide some options for those people.”
But Mr Kaeser the inclusive capitalist sounds a little more like Milton Friedman, with his “business of business is business” mantra, when he articulates his vision for providing these options.
“In order to do all that good stuff, I need to be the best in my industry compared to my competitors,” he said, defending the root-and-branch transformation of Germany’s industrial icon.
And what of those who would prefer he spend more time safeguarding livelihoods than pursuing growth? “Tell them to invest in somebody else,” he said. “But not in this company, which intends to stay here for another 170 years.”
