Oct. 2, 2006

The fundamental value of jobs in Germany and a basic corporate instinct to stop damaging headlines before they begin eroding one’s brand and business were on display as Siemens’s executives deferred whopping pay raises to help German workers stranded by BenQ Mobile’s insolvency.

But a persistent question likely will remain among critics of Siemens: what did Siemens know about BenQ’s plans, and when did they know it?

BenQ acquired Siemens’ handset unit last year in a deal that came with $500 million cash.

Siemens Chairman Klaus Kleinfeld announced that senior managers at Siemens would defer for one year 30 percent pay raises. The move will contribute about $6.4 million to a fund to help 3,000 German workers who may lose their jobs as a result of BenQ’s mobile phone troubles.

The move is largely symbolic, as the amount of deferred executive compensation would provide about $2,000 each to benched BenQ employees.

Germany’s IG Metall union described it as a “drop in the ocean.” The deferred executive pay will be added to a Siemens-created fund, however, which will provide workers a total of $45 million in assistance—about $15,000 each.

But the action by Siemens’ management reflected its recognition of an uproar in Germany from the public, politicians and labor leaders over an insolvency that could wipe out thousands of German jobs.

According to German press reports, Chancellor Angela Merkel even telephoned Kleinfeld to tell him Siemens had “special responsibility” to the abandoned workers.

Former German BenQ employees will be treated as internal applicants for 2,000 existing openings at Siemens in Germany, the company said.

Suspicions that Siemens knew its handset business was unsustainable, despite assurances from Siemens and BenQ at the time the unit’s ownership was transferred, has fueled local anger at Siemens—particularly on the heels of news that upper management had awarded itself 30 percent pay raises.

A peek at that emotionally charged response came in August when BenQ announced 10 percent layoffs at its German manufacturing facilities after a labor agreement expired.

Yet Siemens’ original deal with BenQ was all about divesting a non-performing business unit. And having a Taiwanese manufacturer maintain a relatively expensive work force in Germany was long viewed by industry observers as an inefficient business model that would someday affect German employees.

Kleinfeld said that at the time of the original deal, BenQ had pledged to maintain Siemens’ German production sites.

In light of events, Kleinfeld said, Siemens would consider legal action to challenge BenQ’s insolvency.

Source: RCR News