The reaction to the announcement by Siemens Energy, a company with 92,000 employees and sales of €30bn last year, was brutal. Its share price fell by over a third , wiping off nearly €7bn in market capitalisation. “The market reacted so strongly because Mr Bruch can’t tell how bad the problem is and how much it will cost to fix it,” says Felix Schröder of Union Investment, a fund manager.
Siemens Energy has three sets of problems, says Andre Kukhnin of Credit Suisse, a bank. One is that the integration of Siemens’s offshore-wind business and the onshore operations of Gamesa, a Spanish firm, was not well managed after they joined forces in 2017. Siemens Energy held a majority stake until recently taking full control of Gamesa, in part to get the turbine troubles finally under control.
Another is that Gamesa, like other manufacturers of wind turbines, has been hard hit by supply-chain disruptions, inflation, and a lack of components and raw material such as steel. This has raised costs which it cannot pass on to customers. Their contracts predate these inflationary trends, and do not include provisions to charge more. It is also affected by ruinous competition for public tenders from rivals such asRenewable Energy, Nordex and Vestas.
Whether Gamesa’s problems are fixable at all is the big question, says Mr Kukhnin. Mr Bruch was parachuted in from Siemens Energy’s gas business, where he did a good job. But his credibility is now at stake, as he seems to have underestimated badly the problems at Gamesa.
Investors are waiting nervously for the next quarterly results, which will be unveiled on August 7th. They hope that the company will provide more clarity on the scope of losses in the wind business by then. Siemens Energy has a €102bn order-book backlog and three of the four pillars of its business are in good health. Within the next six to 12 months it will become apparent whether Gamesa can be fixed, says Mr Kukhnin—and whether, as a result, Mr Bruch will stay in his job.