Recall of trams hits Siemens earnings

28th April 2004, Comments 0 comments

28 April 2004 , MUNICH - A recall of hundreds of Siemens-brand trams dragged down the German electronics and engineering giant in the January- March quarter, with the operating result unchanged from last year at EUR 1.08 billion. The Siemens transportation division had to write off EUR 364 million in extraordinary items in the quarter, the second in the group's business year ending 30 September, cancelling out improved earnings in other divisions. The ultimate cost to Siemens could not yet be predicted, sa

28 April 2004

MUNICH - A recall of hundreds of Siemens-brand trams dragged down the German electronics and engineering giant in the January- March quarter, with the operating result unchanged from last year at EUR 1.08 billion.

The Siemens transportation division had to write off EUR 364 million in extraordinary items in the quarter, the second in the group's business year ending 30 September, cancelling out improved earnings in other divisions.

The ultimate cost to Siemens could not yet be predicted, said Siemens finance director Heinz-Joachim Neubuerger. The bulk of the 400 or more Combino trams so far shipped were affected, he added Wednesday.

The low-rider streetcars came on the market in 1997 and were welcomed as a low-cost mass-transit technology. In March, Siemens effectively conceded that the tram's aluminium frame was not strong enough to hold up the heavy roof.

While the division only said it could "not exclude stability problems", experts said that in a crash, the roof might collapse on the passengers in older trams where window pillars had been weakened from long use.

Trams in operation in Amsterdam, Basle, Berne, Hiroshima, Melbourne and other cities may have to be shipped back to Germany to be rebuilt. All trams with more than 120,000 kilometres on the clock have been idled. Some critics suggested the series might be scrapped.

On the Frankfurt Stock Exchange, Siemens stock was as much as 3 percent lower at EUR 62.80 after the news conference.

Chief executive Heinrich von Pierer said Siemens would solve the problem as quickly as it could. More charges were possible.

He still expected group net profit to increase by a double-digit percentage for the full year. A sale of Infineon stock in the second quarter ensured net profit doubled year on year to EUR 1.2 billion.

Group sales were down in the quarter by 2 percent to EUR 17.8 billion, but 11 out of 14 divisions raised profitability year on year.

Siemens' automation division Dematic was also hit by a huge charge. It wrote off EUR 433 million booked as "goodwill". The writedown amounted to an admission that Siemens paid far more to take over Mannesmann Atecs in 2001 than the unit is actually worth.

Siemens' mobile phone business, ICM, returned quarterly earnings of EUR 109 million thanks to strong sales of handsets. At 12.8 million units for the quarter, sales were up by about 50 percent.

DPA

Subject: German news 

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