Power play GE Turns Up the Gas On Siemens

General Electric's planned acquisition of a European turbine maker will rival Siemens on the German company's home turf.
We're coming to get you, Siemens.

General Electric is set to significantly expand its operations in Europe with the purchase of the energy division of Alstom, the French multinational energy and rail transport conglomerate. And although the purchase isn't expected to be finalized until mid-2015, the company is already talking up its plans.

“We have expanded our market share in Germany in the last three years. We want to repeat that now in Europe,” said Stephan Reimelt, who will lead GE's operations in Germany and Europe. “We want to successfully grow.” The acquisition will increase the number of GE staff in Europe from 90,000 to 120,000.

GE announced Wednesday that Mr. Reimelt will replace Fernando Beccalli-Falco, who is leaving the company in January after four decades. Mr. Reimelt has led GE’s energy division in Germany for three years after previously working for industrial firms MAN Ferrostaal and Lurgi.

GE has said for years that it wants to challenge the German engineering giant Siemens in the strong European markets.

The company has said for years that it wants to challenge the German engineering giant Siemens in the strong European markets, but it has mostly been talk. Under Mr. Beccalli-Falco, however, it greatly increased its research and marketing activities on the continent.

His efforts saw GE make significant progress, with a 20 percent increase in orders this year, industry insiders said. German sales in the energy division have doubled in the past three years.

While Siemens has found it difficult to sell wind turbines in Germany, GE sold more than 100 of the new weak-wind turbines there, Mr. Reimelt said. “Moreover, we have won the contracts for the last two major power plants in Germany, in Berlin and Bremen.”

 

Stephan Reimelt taking GE to new heights.

 

GE provides no sales numbers for Germany so growth is difficult to judge.

The German-American Chamber of Commerce estimated revenues of €10 billion, or $12.5 billion, in 2013, based on industry estimates, but this amount seems very high. GE sales in Europe totaled €19 billion last year.

Siemens increased sales in Germany by two percent to €10.9 billion in 2013-14 and in many areas, such as medical technology, it’s likely the Munich-based firm remains far ahead of its U.S. rival.

Mr. Reimelt wants to quickly absorb the Alstom energy division into the company. Its offshore wind turbines and power grids will supplement GE’s portfolio, but the two companies will remain competitors in the energy market until the takeover is complete.

It is likely the Munich-based firm, Siemens, remains far ahead of its U.S. rival GE.

There is a chance that the two companies will face anti-trust actions as combined they will have a 60 percent share of the world market in installed gas turbines.

GE sees huge opportunities for growth in the energy sector, but this rosy outlook is not shared by Siemens. Lisa Davis, the Siemens’ managing board member responsible for power and gas, said demand for large gas turbines has been dwindling for years, while producers are struggling with overcapacity. “As a result, the current demand is accompanied by heavy pressure on prices and margins,” Ms. Davis added.

Mr. Reimelt is undeterred, and stresses that GE wants to grow its energy business. The firm is the only supplier to offer a complete product range from small gas motors to large power plant parts, which puts the company in a good position to cash in on Germany’s transition to 100 percent green energy, he said.

GE has a head start in the decentralized solutions market, which focuses on the idea of producing energy at or near the point of use. It has a market share in Germany of 30 to 40 percent. Siemens has also announced an increased focus on decentralized solutions, but Mr. Reimelt believes that his established customer base will make it difficult for Siemens to catch up.

 

 The author is the chief of Handelsblatt's Munich bureau, and a a specialist on Siemens. To contact the author: [email protected]