Siemens AG Chief Executive Officer Peter Loescher told analysts in November that his plan to revive Europe's largest engineering company would have its setbacks.

A disappointment came on Monday, when Munich-based Siemens said a review of orders, some going as far back as 2004, revealed costs that would cut earnings by about 900 million euros this quarter. Siemens dropped the most since at least 1989, falling 17 percent to 66.42 euros in Frankfurt trading.

Siemens' investigation of its order book is a "painful but necessary step", said Loescher, who took over in July. Since then, he has replaced managers at some divisions, announced 6,800 job cuts and removed the old structure of nine Siemens units that he said was unwieldy.

"Confidence of the market has reached rock bottom," said Jochen Klusmann, an analyst at BHF Bank in Frankfurt, who cut his recommendation on Siemens to "reduce" from "strong buy" after the announcement. "Loescher may be too easy on himself when he says that these things are coming from the past."

"This is clearly a blow to investors' trust," said Thilo Mueller, managing director of MB Fund Advisory in Frankfurt. "The first very emotional reaction was 'sell, sell, sell', without differentiating."

The company reiterated its profit targets for 2010 and said it will make "definitive progress" toward these goals next year.

It's not the first time Loescher has caught investors off guard during his tenure at Siemens. In his first month in office, he announced the purchase of medical-equipment company Dade Behring Holdings Inc for about $7 billion, which investors said was too high. The stock fell 6 percent that day.

Austrian-born Loescher was unknown in Germany when his appointment was announced on May 20.

Siemens recruited Loescher from US drugmaker Merck & Co. At Siemens, he is in charge of more than 400,000 people and oversees products ranging from trains to phone networks to carmaking equipment.

Agencies

(China Daily 03/19/2008 page17)