ELY Callaway Golf Co

During Obama visit, firm plans to play up its part in modernizing American industry

By Christopher Alessi 

MUNICH -- Siemens AG Chief Executive Joe Kaeser aims to show President Barack Obama that Europe's largest industrial company is as integral to the U.S. manufacturing renaissance as American rival General Electric Co.

The president arrived in Germany on Sunday to visit the world's largest industrial trade fair, the Hannover Messe, where the focus is on boosting manufacturers' productivity and efficiency through the Internet.

Siemens is a leader in the so-called Industrial Internet, a global effort to marry heavy industry with the Internet of Things -- a concept in which cloud-connected devices all communicate. Mr. Kaeser has been planning to demonstrate this to Mr. Obama, who was slated to stop by the German engineering giant's sprawling display in Hannover with German Chancellor Angela Merkel on Monday.

Mr. Kaeser's goal, he said in an interview, is for Mr. Obama to walk away saying something like, "Wow, this is really digitalization at work."

Among the things Siemens will showcase are the U.S. sporting-goods companies that use the Siemens's product-management software. One of them is Callaway Golf Co., which will show how it uses Siemens's software to design and simulate the performance of new golf clubs that are still on the drawing board.

Siemens's software is "integral to our design process" and "gets us to the best result more quickly," said Alan Hocknell, senior vice president of research and development at Callaway.

The U.S. is Siemens's biggest market and a priority for Mr. Kaeser as he revamps a company that is nearing its 170th anniversary. He is expanding in developing countries, including Iran and Egypt, whereSiemens last year signed a $9 billion power-generation deal.

The U.S., which is home for about 15% of Siemens's roughly 350,000 employees, accounted for nearly 20% of the company's EUR75.6 billion ($85 billion) in revenue for fiscal year 2015.

Mr. Kaeser believes the U.S., after a period in which financial services were center stage, has "understood how important it is to have an industrial base" for its economy. "It's not so much about bringing production back. It's more about modernizing what they have."

Mr. Kaeser said Siemens's expertise in automating production lines and factories gives it an edge over top rival GE. Automation is considered central to the development of so-called smart factories, where robotic manufacturing units communicate over the Web -- with little human input -- to enable product customization on the shop floor.

A GE spokesman said that while Siemens may have held an advantage in the field of automation, "these gains are no longer differentiating." GE leads Siemens on the big data and analytic technology needed to take the Industrial Internet to the next level, the spokesman said.

Christopher Niesel, a portfolio manager at Union Investment, a Siemens shareholder, said the German company has a "lead over GE" in industrial automation and is pursuing a savvy U.S. strategy by focusing on it. But he said Siemens faces a challenge competing with GE in the U.S., where it has deep customer relationships.

Siemens says its offerings -- ranging from power generation to assembly-line automation to the digitization and analysis of data -- cover the spectrum needed to master the Industrial Internet.

To tap America's industrial base, Siemens in late 2014 agreed to buy U.S. oil-equipment maker Dresser-Rand for $7.6 billion. Shortly after, oil prices started to plummet, and investors have since questioned both the price and timing of the deal. Mr. Kaeser has defended the acquisition, which closed last year, arguing petroleum prices will rebound.

Mr. Kaeser said the Dresser-Rand deal wasn't about getting into the business of extracting oil and gas, but instead selling to Dresser's large customer base and expanding Siemens's own product line.

He said Siemens can help the U.S. oil-and-gas industry weather low prices through automation and digitization. "The way we help them survive is we help them to build a digital oil field," he said.

In January, Siemens agreed to pay $970 million to acquire U.S.-based simulation software-provider CD-adapco, whose offerings include tools that enable oil-and-gas industry to simulate the behavior of reservoirs, digitally manage equipment and analyze operational procedures.

Union Investment's Mr. Niesel said Siemens is "very well positioned in the U.S." following the Dresser-Rand purchase, which should allow the company to expand in the U.S.

A big energy focus for Siemens and its rivals is apart from oil fields, in power grids that are quickly decentralizing.

"This is about micro grids," Mr. Kaeser said of looming changes. "There is going to be solar on the rooftop. There is going to be a few windmills [and] backup conventional power."

To capitalize further on that evolution, Siemens is negotiating a tie-up for its stagnant wind-turbine business with Spain's Gamesa Corporacion Tecnologica SA. Gamesa, which is also a wind-turbine maker, confirmed the talks in a regulatory filing in January, but Mr. Kaeser declined to discuss the situation.

Since Siemens's supervisory board appointed Mr. Kaeser three years ago in a contentious management shuffle, he has sought to streamline Siemens, cut costs and put it back on a path to growth. Mr. Kaeser sold Siemens's consumer businesses and last year legally separated its profitable health-care division in preparation for a possible flotation.

Now investors expect this to be the year that Siemens ends years of stagnation and resumes growth. Mr. Kaeser said the company can only achieve that by adapting faster to external changes, particularly in technology. "You need to understand who survives in the value chain, who is strong, who is weak and who are going to be the 'shovel makers' in the 22nd century Gold Rush -- because they were the ones who became rich, " he said.

Write to Christopher Alessi at christopher.alessi@wsj.com

(END) Dow Jones Newswires

April 25, 2016 02:48 ET (06:48 GMT)

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